Friday, May 20, 2011

SoCal Ports Get High Ratings On Bond Issuances

Key bond and bond refunding issuances at the ports of Long Beach and Los Angeles have received top notch credit ratings from Fitch Ratings, one of the nation's three leading bond credit rating agencies.

Fitch has affirmed its long-term 'AA' rating and a rating outlook of "stable" on the Port of Long Beach's approximately $735 million outstanding harbor revenue bonds and harbor revenue refunding bonds issued by the city of Long Beach.
The Long Beach bonds are secured by a gross lien on port revenues, with a final maturity in 2027.

In explaining the rationale for the "AA" rating, the second highest of ten rating levels, Fitch cited the port's ability to rebound after the downturn in the maritime industry between 2008 and 2010.

Fitch also pointed to the port's "modern" terminal facilities and "excellent" infrastructure; a strong financial profile with a healthy liquid position (1,518 days cash on hand); and, the port's "experienced" and "proactive" management staff.

However, Fitch did mention several risk factors that were considered in rendering the rating, including: the size and scope of the port's 10-year $4.7 billion expansion program that could add to the port's currently moderate debt burden; and, risk to the port's throughput due to the volatile nature of international trade.

Across the harbor at the Port of Los Angeles, Fitch assigned an 'AA' rating to the proposed $110 million series 2011A and series 20011B Harbor Department of the City of Los Angeles refunding revenue bonds. Los Angeles port officials intend to refund $97.5 million of the outstanding series 2001 bonds in order to achieve level debt service savings of approximately 6 percent on a present value basis.

Fitch also affirmed the 'AA' rating to approximately $880 million of port parity revenue bonds.

Both ratings were assigned a rating outlook of "stable."

All the Los Angeles port revenue bonds covered by the Fitch ratings are secured by a senior lien on revenues of the port with a final maturity in 2040.

In explaining the reason for the Los Angeles ratings, Fitch cited: the "healthy return of cargo volumes" at the port following the 2008 to 2010 downturn; the port's "modern and well-invested" terminal facilities; strong and relatively stable revenue sources provided by long-term leases with the port's largest tenants; and, the port's "very strong financial profile that is highlighted by industry high debt coverage ratios, modest net leverage, and a very strong liquidity position."

Fitch pointed out that for fiscal year 2010, the port's debt service coverage ratio on the revenue bonds was 3.20 times, i.e., the port's revenue was 3.2 times the debt payments of the bonds. The port also had unrestricted reserves representing 769 days cash on hand, and the port's overall leverage was modest at 1.9 times net debt to cashflow available for debt service.

As with the neighboring Long Beach port's rating, Fitch cited Los Angeles' exposure to the volatility of the international trade markets as a risk factor for the port.