DALLAS — The Port Authority of Houston is issuing $300 million of general obligation debt this week to take out commercial paper for the port’s expansion and refund bonds sold in 2008.
The refunding is led by Bank of America Merrill Lynch. It has six co-managers: Jefferies & Co., RBC Capital Markets, Siebert Brandford Shank & Co., Ramirez & Co., Rice Financial Products, and Wells Fargo Securities.
First Southwest Co. is financial adviser and Andrews Kurth is bond counsel.
The deal consists of $250 million of Series D bonds and $50 million Series E bonds. It carries triple-A ratings across the board with stable outlooks.
“The outlook reflects our expectation of the Port of Houston Authority’s tax base and tax collection stability,” said Standard & Poor’s credit analyst James Breeding. “As well, the authority has maintained strong financial operations and high liquidity levels in our opinion, which, while not needed for debt service, we believe allow the port to remain self-sufficient.”
The authority shares borders with Harris County and also shares its ratings, though the agency is a legally distinct entity governed by a seven-member appointed port commission.
The authority operates and owns wharves on the Houston Ship Channel that extends 50 miles inland and connects Houston with the Gulf of Mexico.
Port facilities include terminals handling general cargo, autos, containers, grain, other dry bulk materials, project and heavy-lift cargo, and pretty much everything else.
This issue exhausts the port’s remaining GO debt authorization, but the authority’s five-year capital program calls for $971 million of future investment.
Officials expect to seek another $500 million to $600 million in a 2011 bond election. The port no longer has outstanding revenue debt nor plans for any.
The authority’s long-term debt is all fixed rate, and the port has no swap agreements.
Current projects include the Bayport Terminal expansion and retrofitting of Barbers Cut Terminal for container traffic.
The Port Authority is expanding its facilities in anticipation of the opening of the Panama Canal’s’s third set of locks that will double capacity for cargo shipped from Asia.
Ports in the Gulf of Mexico expect to reap a major windfall from increased container traffic when the economy expands.
Harris County, the third most populous in the U.S., includes Houston, serving as the nation’s energy hub.
Moody’s Economy.com reports the metro area’s economic diversity index has improved markedly since the oil bust of the 1980s.
“The county’s dependence on the volatile energy sector remains, but has decreased somewhat over time, given the importance of the medical services/research, transportation, and distribution sectors,” noted Moody’s analyst Robyn Rosenblatt.
Economic challenges include possible loss of jobs at NASA and some job losses from the merger of Houston-based Continental Airlines and United Airlines that is currently underway.
The BP oil leak in the Gulf of Mexico has also created some uncertainty.
“It is unknown whether the BP oil leak (domestic operations based in Houston) in the Gulf will impact federal offshore drilling policy over the long term, nor can Moody’s currently project the potential for negative impact of any potential changes to Houston’s oil and gas-driven economy,” Rosenblatt wrote.
The county’s population has grown 16.5% since 2000, based upon 2009 Census projections driving a trend of tax-base growth.
The authority’s assessed valuation grew a modest 2.7% in fiscal 2010 to $276 billion.
That represented a slowdown from the five-year average increase to 6.3%, analysts indicated.
