PHOENIX - The Port of Oakland has lost its second-largest terminal operator, a blow that Fitch Ratings said should be manageable.
Fitch released a report on situation Wednesday after learning that the port, issuer of A-plus rated senior lien bonds and A-minus intermediate lien bonds, would no longer play host to Outer Harbor Terminal LLC. The operator filed for Chapter 11 bankruptcy protection, stating it has been operating at a loss in Oakland and expected difficulty meeting obligations as it wound down operations at the port.
"Although Fitch views these developments negatively, preliminary financial data from the port suggests the effects ought to be operationally and financially manageable," the rating agency said. "Fitch will review additional legal and budgetary information as it becomes available, likely in the spring of 2016 and will consider any financial repercussions to the port as a result of OHT's bankruptcy. Based on these findings, Fitch may accelerate review of the port's credit rating if such information is deemed to materially weaken the port's credit profile."
Ports America, one of the companies behind Outer Harbor Terminal, indicated that the withdrawal from Oakland will allow it to refocus resources to its operations at the ports of Los Angeles, Long Beach, and Tacoma.
"The company's decision is consistent with carrier trends towards aggregating cargo onto larger vessels which then call at fewer gateway ports, seeking to reduce sizeable capital costs," Fitch said.
OHT accounted for $37.9 million of fiscal 2015 port revenues, or 32% of the port's fiscal 2015 minimum guaranteed revenues from marine terminal rentals. A major mitigating factor protecting the port's credit is that the majority of the cargo moving through it is exports from California's central valley. It should be able to be processed at the port's four remaining terminals, Fitch said.
"Second, slightly less than half of the Port of Oakland's revenues derive from maritime activities, the agency wrote. "The other half stem from commercial real estate activities and Oakland Airport, which will not be affected by OHT's withdrawal."
The port may also repurpose the terminal and further mitigate the financial damage.