Moody’s Investors Service Tuesday downgraded the New Orleans Port Board of Commissioners revenue bonds to Baa1 from A2.
The action affects $88 million of senior-lien bonds rated by Moody’s, which said the outlook remains negative.
The downgrade was based on the recent decline in the port’s financial performance reflected in declining debt-service coverage by recurring net revenues as well as revised financial projections, which reflect slower than anticipated financial recovery, said a report by Moody’s analyst Baye Larsen.
The rating also incorporates the port’s ample liquidity position, which will provide critical flexibility over the next several years of tight financial performance that is projected to result in slightly less than one times coverage of all debt obligations, including senior, subordinate, and capital leases, Larsen said.
The negative outlook reflects Moody’s expectation that the port will be challenged to increase net revenue sufficiently to exceed coverage projections and provide sufficient coverage of all debt obligations in the near term.
“The outlook also reflects the uncertainty surrounding the recovery of global and local economic activity and the impact this will have on the port’s cruise business and the timing of revenue growth,” Larsen said.
The port’s board had a strong unrestricted cash position, with $77.5 million, or 830 days’ cash on hand at the end of fiscal 2009, of which $10 million is an operating reserve. The port also had comparatively low leverage and no plans for additional debt, as well as plans to pursue grants and private investment for most major projects.
Larsen said the port’s market position is challenged by the economically sensitive cruise industry, which provides 12% to 14% of total revenues, and volatile cargo levels.
The port’s facilities are located on 22 miles of waterfront along the Mississippi River, the Inner Harbor Navigational Canal, commonly known as the Industrial Canal, and the Mississippi River Gulf Outlet. They include 19 terminals serving bulk, container, and cruise operations.