DALLAS - Moody's Investors Service assigned a negative outlook to $24.6 million of debt issued by Galveston Wharves Dec. 2, indicating a potential downgrade to the Texas port's Baa1 rating.
"The negative outlook reflects the losses in cargo volumes and cruise service just as the port faces increased debt service starting due to the full amortization of debt issued by the City of Galveston for port projects," said Moody's analyst Myra L. Shankin.
"Without a significant near-term recovery in both cargo and cruise volumes, these challenges have the potential to squeeze financial margins and coverage levels, putting further downward pressure on the rating," she added.
Moody's updated the outlook on Dec. 2.
Standard & Poor's last rated the debt BBB-plus with a stable outlook in December 2012. Fitch Ratings does not rate the debt.
Galveston Wharves is a relatively small port on Galveston Island, off the Texas Gulf Coast, about 40 miles southeast of Houston along the 45-foot-deep Galveston channel. Galveston generates its revenue primarily from leases and operating agreements. The port and its tenants specialize in several niche operations, including dry dock ship repair, cruise ship operations, and grain exports.
Moody's noted that there are no plans to issue more debt for the port,which was hard hit by Hurricane Ike in September 2008 just as the world's financial markets were collapsing.
"The facilities have been recently updated and the port has significant restricted cash available for capital improvements from unused bond proceeds, grant funds, and FEMA and insurance proceeds from Hurricane Ike," Shankin said.
