The Virginia Port Authority blazed a new financial trail by using a bond sale to finance an upfront lease payment, avoid inflation, defease outstanding debt, and facilitate an ownership change for a key container terminal.
"This was a very unique transaction," said Rodney Oliver, CFO for the Port of Virginia, as the authority brands its operation.
The August pricing of $248.7 million port facilities revenue bonds is The Bond Buyer's
The roots of the deal stretch to 2016 when the Virginia Port Authority cut a long-term lease deal with Virginia International Gateway, the private owner of a terminal in Portsmouth.
The lease allows the authority to operate VIG, which opened in 2007 as the first privately owned container terminal in the U.S., according to the deal's operating documents. The 2016 lease gave the port an option to purchase the terminal at market value in 2065 at lease end.
VIG is owned by Universities Superannuation Scheme Ltd., a pension fund based in the United Kingdom and Public Sector Pension Investments, one of the largest pension investment managers in Canada.
The VPA is a political subdivision of the Commonwealth of Virginia that administers the state's public marine terminals.
The VPA owns Norfolk International Terminals, Newport News Marine Terminal, Virginia Inland Port, the Portsmouth Marine Terminal and the Richmond Marine Terminal on the James River.
In 2025, after more than a year of negotiations, VIG and VPA agreed on a multi-pronged arrangement known as the First Amendment that solved several challenges with the lease.
The First Amendment increased the base lease amount and teed up an upfront rent payment of $335 million from VPA to VIG. The deal allowed all outstanding port facilities revenue bond debt, including three sets of 2016 bonds and three master equipment leases, to be defeased.
And it put in writing the port authority's option to buy Virginia International Gateway at the end of the lease at a fixed price.
"The upfront payment was a requirement from the lease amendment negotiations. The ability to issue pure tax-exempt debt to finance a portion of the upfront payment was a significant benefit for the port," Oliver said.
"The importance of renegotiating this lease cannot be overstated," said Stephen A. Edwards, CEO and executive director of the VPA. "This is a move that has long-term benefits for The Port of Virginia and for the Commonwealth."
The VPA created a complex escrow system while also preserving its call right within the escrow to maintain flexibility and leave an option to restructure the debt in the future should market conditions warrant.
The only catch was the VPA was required to make the $335 million upfront payment by July 10th, 2025, or incur an 8% ticking fee.
To meet that deadline the VPA tapped its own cash reserves and opened a $470 million revenue-backed line of credit with Bank of America, N.A.
"We established the line of credit to ensure we met the deadline for execution of certain "conditions precedent" within the lease amendment," said Oliver.
"The primary financing requirements were the defeasance of all our existing terminal revenue debt and the upfront payment," he said. "The line of credit helped us accomplish both."
The First Amendment gave the VPA enhanced operational control of the VIG terminal and an option to buy the facility in 2065 for a fixed price of $950 million, with no inflation adjustment.
"We now have a long-term agreement to lease and operate VIG through 2065 with an option to buy at a set price," said Edwards, who announced in November that he
"Had we continued under the previous agreement and opted to buy, we would have been negotiating at 2065 market prices," he said. "This move also gives the VPA greater control over operations and investments at the terminal, which allows for a more efficient use of capital across our operation."
Following the defeasance, the VPA repaid a portion of the credit line with available cash.
On Aug. 26, upon delivery of the long-term bonds, the VPA repaid the remainder of the credit line drawn to fund the upfront rent payment on an interim basis.
The Series 2025 Bonds marked the Authority's first port facilities revenue bond issuance since 2016.
The bonds, with a 10-year par call structure, were rated A1 by Moody's Ratings and A by S&P Global Ratings.
The transaction generated robust investor demand, according to port officials, receiving orders from 48 investor accounts, including bond funds, mutual funds, investment managers, hedge funds, and retail investors.
"We had $702 million in orders, were 2.8x oversubscribed and we were able to tighten credit spreads later in the afternoon of the issuance as a result," said Oliver.
The successful bond pricing happened during a time of global trade uncertainty including tariff-related pressures. The advanced technology underpinning the operations at the Portsmouth terminal helped hedge the bets.
The VIG Terminal was a leader in embracing automation when it opened in 2007 as a 231-acre greenfield project built from scratch.
Since then, other U.S. ports have moved towards automation by employing automated guided vehicles, and automated straddle cranes.
VPA is also working with the Army Corps of Engineers on an ongoing dredging project that will make the its ports the first on the East Coast able to support two-way shipping traffic for vessels requiring 55-foot drafts.
Virginia's major port facilities, including VIG, are centered in Hampton Roads, one of the largest natural harbors in the world, in the center of the U.S. East Coast. Roughly 75% of the U.S. population lives within two delivery days from the ports, the authority says.
Differing from other landlord-style ports, VPA and its subsidiary Virginia International Terminal function as a single operator to align cargo demand with terminal resources across multiple facilities based on the same harbor.
Landlord ports typically own the infrastructure of the facility but leases out the operations. Operating ports own the infrastructure and handles the operations internally.
"The benefits of the transaction for the Port and the Commonwealth are greater operating flexibility and investment control, bringing certainty to the long-term upgrade and replacement of the assets over time for both the Virginia International Gateway asset and the remainder of the Port facilities," said Oliver.
