DALLAS — Rating changes may be on the horizon for some U.S. seaports over the next 12 months but no major changes are expected in the sector, Fitch Ratings said in its latest ports peer review.
"Approximately 75% of port sector ratings maintain stable outlooks, and Fitch expects stable rating trends in the near to immediate future," said analysts Seth Lehman, Emma Griffin, and Stacey Mawson. "Credit risk is still relatively low among U.S. ports thanks in part to their cash flow resiliency amid volume fluctuations during economic downturns," the analysts said.
Most ports with a stand-alone pledge of port revenues for debt service that does not include tolls or collections from other sources are in the A category, Fitch said. The review did not include ports that have significant revenues from operations or debt supported by local property taxes.
The 16 ports rated by Fitch include 13 with an A-1 or better, two in the BBB category, and one in junk bond territory.
"Ports should continue to see modest growth for the remainder of the year," the midyear report said. "Shifting alliances are leading to shippers sending fewer, larger ships, so channel deepening and inland infrastructure improvements are in the works to address congestion."
The annual peer review of rated port credits is based on five rating drivers, Fitch said, which include a port's approach to infrastructure renewal and development, flexibility in debt service, financial risk of the port's debt structure, and cargo throughput.
"The assessments were predominantly stronger or midrange, consistent with the generally strong credit characteristics and investment-grade rating levels seen for port credits in the U.S.," the report said.
Fitch's three revisions to port rating outlooks since the 2015 peer review include a move to negative for the Alabama Port Authority and shifts to positive for the North Carolina State Ports Authority and the Port of Palm Beach, Fla. The positive outlook in the 2015 peer review for Tampa's Hillsborough County Port District was maintained.
No other port rating changes were made during the year.
In its transportation outlook for 2016 published in December, Fitch said port throughput and revenues should keep pace with an expected 2.5% increase in gross domestic product.
"Management of congestion and increasing freight volumes, both inside and outside port gates, remains a focus as vessel size and cargo loads continue to grow," the 2016 outlook said. "Supply chain adjustments may result in shifts in volumes among U.S. ports."
Moody's Investors Service said in a report earlier this month that increased federal funding for freight transportation infrastructure is a credit positive for U.S. ports.
The new five-year federal transportation funding bill provides new funding sources for freight-handling projects that will relieve congestion at U.S. seaports, Moody's said. The projects include upgrades to port freight-handling infrastructure and landside projects to expand road and rail access to port terminals.
"Less congestion increases operating efficiency and throughput rates for ports, saves time, and reduces transport costs for shippers," Moody's said.
The American Association of Port Authorities said in April that ports and their private sector partners expect to spend $154.8 billion over the next five years on freight and passenger infrastructure projects.
The total includes $22.6 billion of capital spending by ports and $132.2 billion of private investments by shippers, said AAPA president Kurt Nagle.
"The combined $155 billion, five-year investment that U.S. ports and their private sector partners are planning represents a more than three-fold increase over the combined $46 billion figure obtained from the same survey five years ago," Nagle said.
