Following an extensive review by three national bond rating agencies, the Virginia Port Authority (VPA) has become the first major port owner/operator on the US East Coast to carry a ‘double A’ bond rating.
In September, Moody’s Investors Service, Fitch Ratings and Standard & Poor’s all reviewed the VPA’s plan to pay back the revenue bonds it will sell to finance the expansion of the north berth at Norfolk International Terminals. That project consists primarily of the purchase of three new Suez-class cranes, a 900-foot expansion of the wharf and a reconfiguration of the container and rail yards; it will cost $90 million.
Both Moody’s and Fitch upgraded their ratings of the VPA’s bonds; Moody’s rating went to ‘Aa3’ from ‘A1’ and the Fitch rating went from ‘A+’ from ‘A’. The Standard & Poor rating remains an ‘A’.
‘When you read the reviews, it is clear that all three firms understand the importance of the backing this port receives in Richmond,’ said J. Robert Bray, the VPA’s executive director. ‘Our high marks come, in part, to our financial planning, the annual support we receive from the state’s Transportation Trust Fund and the overall positive business climate in Virginia. This is not something we could have achieved all by ourselves. We’ve had a lot of success this year and this ranks very near the top of the list.’
In their analysis, all three rating firms highlighted the VPA’s sound financial track record, the port’s overall growth/expansion plans, its long-term contracts with primary customers, improvements to rail service ’ the Heartland Corridor ’ strong support in state government and the seasoned leadership at Virginia International Terminals Inc. (VIT), the VPA’s non-stock operating company. In addition, the port’s natural assets such as deep shipping channels, a geographically strategic position on the East Coast and a natural harbor that is 18 miles from open ocean were all cited as factors for the port’s continued strength.
According to Moody’s: ‘The upgrade incorporates VPA’s cargo and revenue growth over the past five years and its competitive advantages, which position it well for the forecasted rise in demand for port services. The rating also notes the authority’s track record of sound capital planning, consistently stable financial management and performance and its ability to issue bond backed by the Commonwealth of Virginia (rated Aaa), which allow VPA to finance necessary capital projects and maintain a low debt ratio on its senior lien port revenue bonds.
VIT has achieved high performance and throughput on terminals by way of more efficient use of terminal space, demolition of excess warehouse space, implementation of a chassis pool and the move to a straddle carrier operation. These efforts have helped VIT lower operating expenses to roughly 50 percent of revenues in each of the last five years.’
According to Fitch: ‘The upgrade to A+ reflects the authority’s consistently sound financial performance, growing container-based trade activity, a balanced level of activity between imports and exports and its diverse mix of both shipping lines and trading partners. It also incorporates the port’s favorable geographic location and facilities, which offer several advantages over competing East Coast ports.
[We] believe that the expansion of the logistics and distribution industry in Virginia and nearby North Carolina, improving rail connections to the South and Midwest, the port’s unique ability on the East Coast to accommodate the largest cargo ships and the strong growth prospects for port traffic are important offsets [to competition].
Solid cargo growth and increasingly efficient operations have produced sound financial results’ Revenues have become increasingly predictable due to the recent ability of the authority to garner 10-year contracts with shipping lines structure with minimal annual guarantees and escalation clauses in regard to both volume and revenue.’
According to S&P: ‘The port benefits from its good competitive position, as a natural deep chann