LOS ANGELES — Moody's Investors Service downgraded two Port of Seattle revenue bond liens ahead of a $139 million refunding bond sale in December.
Moody's downgraded the port's intermediate lien revenue bonds to A1 from Aa3, and assigned the rating to the new bonds. The agency also downgraded the port's outstanding subordinate lien revenue bonds to A2 from A1. The port's first lien bonds were affirmed at Aa2. All bonds have a stable outlook.
"The downgrade is based on increasing debt service requirements and the port's weakened market position," analysts said in a recent report. "Changes in the commercial aviation and global container shipping industry, the port's two primary business lines, have reduced the port's ability to generate the same high margins."
The port's margins, primarily measured by debt service coverage, have narrowed substantially after the economic downturn. However, Moody's expects the margins to recover quickly, given the port's strong market position.
The Port of Seattle is a municipal corporation of Washington State and operates a major marine port facility and Seattle Tacoma International Airport. The port operates as a landlord port, with revenues from containerized cargo business derived from terminal leases and crane rentals.
Standard & Poor's and Fitch Ratings both affirmed their A-plus ratings on the intermediate bonds and A ratings on the subordinate bonds. Both agencies assign stable outlooks.
"The ratings on the port's bonds are based on our view of the diversity of the revenue base, which includes the airport, the seaport, and the tax levy, as well as the airport's market position," said Standard & Poor's credit analyst Todd Spence. "Further supporting the rating is our view of the port's solid coverage and liquidity levels."
The Port of Seattle is planning to sell $139 million of intermediate lien revenue bonds during the week of Dec. 2 to refund approximately $138.2 million of its Series 2003B senior lien bonds. The transaction will restructure the debt from the senior lien to the intermediate lien and allow for a cash funded debt service reserve.
The port expects to realize a net present value savings of 8.95% from the refunding.
Bank of America Merrill Lynch is the lead underwriter. K&L Gates LLP is the bond counsel and Piper Jaffray is financial advisor.
