Fitch Ratings last week affirmed the A rating on the Jacksonville Port Authority’s $53 million of Series 2006 port revenue refunding bonds.
The affirmation is in conjunction with the authority’s plan to conduct an interest-rate period conversion on the Series 2006 bonds on March 5 from auction-rate mode to a long-term rate with a mandatory tender date of Nov. 1, 2009. Bond proceeds will refinance all of the JPA’s Series 2006 bonds.
“The authority has disclosed to Fitch that four to five months before the tender date the port will initiate the process for refinancing the Series 2006 bonds with either fixed-rate debt or variable-rate demand obligations,” said a report by analyst Vanessa Roy. “Should the authority encounter limited market access and not commence a refinancing strategy before the date of tender, the bonds would bear interest at the maximum rate until the remarking agent successfully markets the bonds or they are redeemed by the authority.”
Although the transaction is an interest rate period conversion, Roy said there is risk of future market access inherent in the put bond structure, which could pressure the JPA’s finances should the remarketing be delayed and the port be forced to pay the maximum interest rate of 12% for a sustained period of time.
Fitch believes the port’s net revenues are sufficient to cover such an event. However, it will likely require action by management to delay planned additional borrowing to maintain current financial flexibility or use of the authority’s available liquidity under its commercial paper program.