WASHINGTON — A Fitch Ratings report released this month lengthens the shadow cast over transportation credits by the economic downturn. However, the agency predicted an eventual upturn for seaports.
Fitch analysts are predicting a “slow and gradual recovery” for the U.S. seaport sector. It may take several years for maritime trading volume to return to the “historic peak volumes seen in 2007,” the report said, adding that could mean “trouble for ports or terminal transactions with growing debt-service obligations.”
A two-year drop in maritime trade and the constrained economy have put pressure on the sector, Fitch said. The agency has kept a negative outlook on seaports since mid-2008.
Fitch recently performed a comprehensive review of all the seaport credits it rates and modified the ratings or outlooks for nearly all of them. This action led to “a somewhat lower average rating profile for the credits in the seaport sector,” and a larger gap between the strongest and weakest port credits. The report listed 24 credits that it rates in the sector.
Larger ports with more stable cash flows or port agencies with lower leverage “are comparatively well-positioned,” the analysts found.
Nearly all West Coast ports rated by Fitch have stable outlooks, according to the report. A few were assigned AA ratings. East Coast also ports were mostly stable, with a couple of them on negative watch; their ratings range from BBB-minus to AA-plus. The three inland ports included in the report had stable or negative outlooks with BBB-minus to BB-plus ratings.
“The rated portfolio is largely investment grade, with the median rating in the lower end of the 'A’ category,” Fitch said. “Barring further throughput declines or increasing leverage, ratings are more likely to remain stable over the medium term.”
But as the sector recovers, port ratings may not return to their pre-recession levels because of factors like the Panama Canal expansion and its upward effect on competition for Asian trade, analysts said.
Other factors will include the management of capital improvement programs at ports, especially as ports attempt to lure more cargo traffic. Seaports are likely to seek more private-sector investment as they work to expand through capital improvements, according to Fitch.
Despite the lagging economic recovery predicted for 2010, “the sector’s investment-grade ratings are buoyed by the essential nature of port infrastructure to the global economy,” the report said.