Air Cargo Quarterly
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Port of Miami launching $385 mlllion bond deal
Readying for the 2015 completion of an industry-shifting expansion of the Panama Canal, the port owned by Miami-Dade County handles 1,600 cargo vessels a year and is spending nearly $1 billion on capital improvements through 2018.
The canal expansion will allow much larger cargo ships to use the Central America passage and is widely expected to draw Asian shipments to East Coast ports that now drop loads at West Coast facilities.
Ports in Baltimore, Norfolk, Virginia, and elsewhere along the Atlantic and Gulf coasts are also preparing for the bigger ships that promise to increase shipping volumes but require deeper channels.
Overall, U.S. seaports that together handle 95 percent of America’s overseas trade volume are plowing about $46 billion into capital projects between 2012 and 2016, a level which dwarfs the $501 million annual average between 1946 and 2001, according to Wells Fargo Securities analyst Randy Gerardes.
“You have a lot of ports getting ready to accommodate the big ships and modernizing,” Gerades said on Friday.
A third of the money will be spent by port agencies and two thirds spent by private companies on marine facilities and warehouses, Gerardes said.
Underwriters for the Miami deal were expected to sell $385 million of seaport revenue, with most having a 2042 maturity, according to Dalcomp.Retai customers were to be offered the bonds, and pricing for institutions was expected.
Downgraded by Moody’s
The bonds, which will be used to pay for dredging of a channel due to be finished next year, some costs of a tunnel project, wharf improvements and refinancing of older debt, are rated A by Fitch Ratings.
But Moody’s Investors Service last week reduced its ratings on the deal to A3 from A2, saying the borrowing represented a substantial increase in the port’s use of leverage and marked a big change of its debt profile.
Moody’s said the port was important to Miami-Dade’s economy and county government and that the tunnel and other capital projects would make the facility more attractive to shippers, but it also faced stiffening competition for its mainstay cruise business from other ports and weak liquidity.
The Port of Miami located on a small island by Miami’s downtown had cash on hand for 33 days, in comparison to Port Everglades in nearby Fort Lauderdale with 1,136 days of cash, according to a report by Gerardes.
Given the recent, sharp rise in tax-free and other interest rates, the Miami-Dade deal should see solid demand, especially from sophisticated buyers able to discount the exodus by many investors from muni bond funds, Gerardes said.
A-rated 30-year revenue bonds on Thursday closed with a yield of 5.55 percent, or 30 basis points more than a month earlier, according to Municipal Market Data.
Raymond James & Co is the lead underwriter for the offering, which will be composed of a $250 million series A and three other series, according to a preliminary offering statement.
The Port of Miami, Fitch said in a presale report, “benefits from stable revenue streams from various business lines (cruise lines 50 percent, container 40 percent). The port does have some exposure to fluctuations in the cruise business and to the competitive port environment in South Florida and the Southeastern seaboard.” (Reuters)
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