DALLAS - The Port of Beaumont Texas, the nation's largest in military cargo shipments, took a one-notch Moody's Investors Service downgrade to A3 April 29 on its $17.8 million of outstanding debt.
"The downgrade is based on a recent negative trend in operating revenues combined with reduced levels of unrestricted liquidity," according to lead analyst Victoria Shenderovich.
Tracy Mills, director of finance and administration for the port, said the downgrade was not unexpected. Since the port operates mostly on a pay-as-you-go basis, cash levels vary widely based on upcoming projects, Mills said.
"When they established their baseline 4 or 5 years ago, we had accumulated a lot of cash for our construction projects," he said. "When they did their surveillance, all they saw was that our cash is down. It's not that big of a deal."
Fitch Ratings affirmed its A rating on April 23 and maintained a stable outlook.
"The rating affirmation reflects the cargo and military focused port with an established operating history, sustained revenue growth since the recession from cargo alongside strong cost management and a minimal capital program with no material borrowing anticipated," Fitch analyst Emma Chapman explained.
Overall tonnage at the port remains volatile, according to analysts, with fiscal 2014 tonnage increasing 10.5% but still 15.2% below the peak in fiscal year 2011. Tonnage growth has averaged 1.2% over the past 10 years, and is 26% higher through February fiscal 2015 year-to-date than the same months last year due to forest products and liquid bulk.
The port's top five tenants and operators generated roughly 55% of operating revenues in fiscal 2014.
"The U.S. Army continues to provide diversity and stability as the largest tenant, accounting for 30% of operating revenues," Chapman said.
Beaumont is headquarters of the 842nd Transportation Battalion, which manages shipments of vehicles to and operations throughout the world.
The port of Beaumont is supported by a property tax levied in Jefferson County. Among the largest taxpayers are oil refineries and other petrochemical manufacturers.
"Property taxes, though unpledged, provide overall revenue stability to counteract maritime revenue volatility, and long-term contracts from established tenants anchor maritime revenues," Chapman said.
In assigning a stable outlook, Moody's noted Beaumont's status as the busiest military cargo port in the U.S. and interconnectivity through waterways, major highways and railroads.
"The diversity of cargo that passes through the port helps to stabilize operating revenues while volumes for each cargo type have fluctuated," Shenderovich said.
