Moody’s Investors Service revised the outlook on the Port of Seattle’s outstanding revenue bonds to negative from stable amid a weakened ability to raise rates.
“The negative outlook is based on the growing negative pressures on the port’s finances through the combination of weakened rate flexibility across the Port’s main operating functions,” Moody’s said in a report released Wednesday.
The ratings firm said the port’s inability to reach an agreement with airlines to renew a use and lease agreement shows a weakening market position, and may limit its ability to raise rates and implement needed capital programs while maintaining historic margins.
The port’s market position has been hit by the move of four shipping lines to the Port of Tacoma and the Port of Seattle’s decision to change the terminal lease rate structure to one that will provide “substantially lower revenues,” according to Moody’s.
“The combination of these two stresses, in particular, will suppress the port’s ability to continue its recovery from the economic downturn as quickly as expected,” Moody’ said. “These stresses are exacerbated by industry trends of airline consolidation that has led to an increased concentration of enplanements by Alaska Airlines at the airport and of shipping overcapacity that pressure seaport rates lower.”
The port has $2.7 billion of debt outstanding.
Moody’s affirmed the ratings on the all of the port’s liens, including the Aa2 rating on the its first lien revenue bonds, the Aa3 rating on intermediate lien revenue bonds, the A1 rating on subordinate lien revenue bonds.
The A1 rated passenger facility charge revenue bonds kept their stable outlook, according to Moody’s.
Moody’s also assigned an A1 underlying rating to the port’s 2008 subordinate lien revenue bonds that recently were remarketed with a letter of credit from the Bank of Tokyo-Mitsubishi UFJ Ltd.