DALLAS — Moody’s Investors Service doesn’t expect any “immediate impact” on the creditworthiness of issuers along the Texas Gulf Coast hit by Hurricane Ike earlier this month.
Doug Benton, vice president and senior credit officer in the Dallas office of the rating agency, said the issuers affected the most are contained in Galveston, Brazoria, and Chambers counties in southeast Texas.
The Department of Energy reported Wednesday that roughly 514,000 customers are still without electricity in Texas, including more than 400,000 in Harris County, which includes Houston and is some 50 miles north of Galveston. The DOE also reported that 66.8% of crude oil production and 61.6% of natural gas production in the Gulf of Mexico remains shut in.
“Despite damage in that area ranging from minimal to significant, most issuers appear to have begun the recovery process, and there is no immediate impact on the comprehensive creditworthiness of the area,” Benton said. “Of the municipal issuers contacted by us, none report difficulty making debt service payments in full and on time.”
Moody’s said it rates 59 issuers in the three counties for a total of $2.9 billion. Analysts said more than 75% of the debt issued by the entities are rated A2 or higher, and only one has a non-investment-grade rating.
“Most of the issuers experiencing the greatest amount of relative damage are local governments,” Benton said. “Aside from the Port of Galveston and one housing-related issuer, most Moody’s rated nongovernmental debt issuers were primarily located further north in the Harris County-Houston area and were less severely affected by the storm.”
To the southeast near the Louisiana border, the Port of Beaumont Navigation District was planning to bring $9.9 million of revenue bonds to the competitive market last week, but postponed the deal indefinitely.
When the issue eventually gets sold, proceeds will fund upgrades to the port as part of a $52.5 million capital improvement plan that began last year.
Earlier this month, Moody’s upgraded its underlying rating on the district’s general obligation debt to A1 from A2 and raised the rating on revenue bonds to A2 from A3.
Fitch Ratings assigned an A rating to the sale and affirmed the rating on $21.4 million of GO debt outstanding and $16 million of revenue debt outstanding. “Economic disruption in the affected areas will be of relatively short duration and that negative credit implications for rated entities is unlikely,” the agency said.
“Sometimes when the water recedes and the cleanup begins, folks get to rebuilding and it provides somewhat of a boost to the local economy, as sales tax revenues increase,” Fitch senior analysts Doug Scott said last week.
More than 1.2 million residents along the upper Texas and Louisiana Gulf Coast fled the storm’s path and most have yet to return. Many of those that stayed are still without power nearly two weeks after the storm, which had 110-mph winds and was labeled as a Category 2 hurricane.
Yesterday morning, Galveston Island residents finally were allowed to return to their homes although there is little drinkable water and limited food, sewer, and medical facilities. A curfew is in effect nightly from 6 p.m. to 6 a.m., according to the Associated Press.
Galveston officials estimate between 10,000 and 20,000 residents lost their home in the storm. The city’s population is roughly 57,000.
Estimates of insured damages in the region range between $6 billion and $18 billion. Texas Lieut. Gov. David Dewhurst told a Senate Homeland Security subcommittee this week that the state puts the preliminary damage assessment for recovery from Hurricane Ike at $11.5 billion.
Rep. Gene Green, D-Houston, and Rep. Kevin Brady, R-The Woodlands, have said they plan to work together to add a regional aid package to a government funding bill that must pass by Sept. 30. Sen. Kay Bailey Hutchison, R-Tex., said she would lead the effort in the Senate.
Last month, Galveston County commissioners voted to ask voters to approve in November a $135 million general obligation bond package to improve roads and flood control in the low-lying county. The county’s general obligation debt is rated Aa2 by Moody’s and AA by Fitch.
