Moody’s affirms rating on debt tied to Port of Charleston
Moody’s Investors Service has affirmed a high rating for the State Ports Authority’s outstanding debt and provided a stable outlook, while also pointing out some challenges for the maritime agency.
“The outlook for the port authority is stable based on our expectation that the cargo and shipping-line service will continue to grow at moderate levels, requiring capacity-enhancing capital projects which will reduce liquidity and debt service coverage from current levels,” Moody’s wrote. “The authority will continue to be challenged by a highly competitive and evolving environment.”
The ratings firm said the SPA and its terminals have several competitive advantages, such as the proximity to open ocean from its terminals, good labor relations, high productivity levels and its deep-water harbor.
It means the Port of Charleston “will be well-positioned after the Panama Canal expansion is completed” in 2015, Moody’s said in affirming its “A1” rating.
Additional strengths are the SPA’s well-balanced trade makeup and diverse business profile, its financial performance and low debt.
The report also credited a “strong commitment by the state of South Carolina to fund infrastructure improvements” that will benefit the port. That included the General Assembly’s decision this year to set aside $300 million to pay for the deepening of Charleston Harbor if federal funding cannot be secured. The ratings update also reflected the port’s growth outlook and the SPA’s plan to invest $1.3 billion in improvements over a decade.
Challenges for the ports authority include a relatively weak debt-service reserve fund and the fact that most of the SPA’s commercial contracts expire in or before 2015, “introducing renegotiation risk.”
The ratings firm also cited the legal challenges to Carnival Cruise Lines, saying that could affect cruise income, which accounts for 6 percent of the SPA’s total revenue.
Moody’s said Charleston continues to operate in a “highly competitive environment with several large ports nearby competing for discretionary cargo.”
“The authority’s competitive challenges include a relatively small local population base, and less rail access and distribution center presence compared to competitors,” it said.
An inland cargo-handling rail site the SPA plans to open in Spartanburg County next year “adds to the connectivity of the port,” Moody’s added.