Moody's Investors Service downgraded the Port of Oakland's senior-lien revenue bonds to A2 from A1 on weakness in both seaport and airport revenue.
The agency downgraded the port's intermediate-lien revenue bonds to A3 from A2. The outlook is stable.
"The downgrade is based on the deterioration in the port's FY 2009 aviation market position, enplanement levels, and maritime cargo levels that has resulted in lower-than-projected revenue growth, rising cost per enplanement, and reduced liquidity levels," said analyst Baye Larsen.
Passenger enplanements fell 27% in fiscal 2009 at Oakland International Airport — which faces competition for Bay Area travelers from both San Francisco International Airport and Norman Y. Mineta San Jose International Airport — while container cargo at the seaport dropped 7%.
Container volume fell 7% in fiscal 2009 to 2.1 million twenty-foot equivalents. By tonnage, cargo dropped 11%. The number of containers is expected to decline another 3.1% in the current fiscal year, according to Larsen.
The declines in the port's two main businesses have helped narrow its aggregate debt service coverage ratio to 1.38 times in fiscal 2009, down from a recent peak of 2.05 times in fiscal 2005.
The revenue decline coincides with "growing intermediate debt service requirements," said Larsen, who also cited the "weakened security' of the intermediate-lien bonds' by the debt service reserve surety, which was provided by National Public Finance Guarantee Corp. and MBIA.
"While the port remains a fundamentally essential participant in a large, robust metropolitan area, it is likely to take several years for the aviation and maritime businesses to recover to their previous operating and financial positions," Larsen said.
