More details have become available about Moody's rating agency's take on the soundness of 18 US ports plus two intermodal corridors. "Negative credit pressures remain as ports recover from revenue and cargo losses that fell to levels well below earlier expectations," it says in the latest comment on the sector.
"In general, the highest levels of cargo and passenger volatility occurred at ports that operate in a particularly competitive market area, and/or have above-average concentration in trade partners, customers, or cargo types. The competitive market environment resulted in loss of business to alternative routes and greater pressure to provide rate relief. Ports with more concentrated operations had little flexibility to offset their cargo and passenger losses.
"Ports that experienced an above-average level of cargo and passenger declines are generally at greater risk of negative credit pressure due to the associated decline in operating revenues and/or loss of relative competitive position. However, ports that have particularly strong financial metrics and stable operating revenues, like Port of Long Beach, or low leverage positions, like South Carolina Ports Authority, are well-positioned to maintain their financial flexibility despite their container declines," says Moody's.
The inference from this is that there is growing uneasiness about ocean trade, because of a possible double-dip recession.
In an overall summary of the debt and bond situation, Los Angeles and Long Beach are given the best rating of Aa2, while Palm Beach port district is bottom with Baa3.
"Those ports that are most exposed to these challenging sector trends are likely to experience negative credit pressure in the coming year. Of the 10 ports in the portfolio that offer cruise operations, the top three declines [in 2009] occurred at the Palm Beach Port District, the Hawaii Port Facility, and the Port of New Orleans (New Orleans Port Board of Commissioners)."
The fragility of port finances is highlighted in the figures on debt coverage and cash available.
"The median aggregate debt service coverage (on a bond ordinance basis) declined 18 percent to 2.09 times in fiscal 2009 from 2.56 times the prior year. Similarly, the median days' cash on hand declined 13 percent to 591 days in fiscal 2009. While these are relatively high financial medians compared to other sectors, they are appropriate in light of ports’ exposure to operating volatility."