Moody’s assigns Aa2 to Georgia Ports Authority’s $769 million Revenue Bonds, Series 2022; stable outlook
Moody’s Investors Service has assigned Aa2 to Georgia Ports Authority’s (“GPA’s”) $769 million Revenue Bonds, Series 2022. The outlook is stable.
The Aa2 rating reflects GPA’s 1) excellent financial flexibility, with robust cash flow, low debt, and a competitive and flexible cost structure; 2) substantial market position, as a nationally significant gateway port with increasing scale and improving infrastructure capability; 3) above-average growth prospects, driven by supportive regional demographics and ongoing market share gains; 4) conservative financial management, with strong debt service coverage and solid liquidity projected to be maintained through the funding of a sizeable 10-year capital plan; and 5) favorable governance linkage with the State of Georgia (Aaa stable), which has included significant direct and indirect support in addition to management involvement and alignment on economic development and transportation planning.
Robust debt service coverage ratios, in excess of 5x through the forecast period, balance volume risk and provide resilience to unanticipated financial challenges. GPA will have to manage a sizeable and multi-faceted capital spending plan as it adds significant new capacity over the next 10 years. The authority has successfully delivered several large projects in recent years; the majority of planned spending will be funded internally; and the program is expansion oriented, and demand driven. This supports our expectation that the plan will be executed as outlined and the authority will retain above-average financial flexibility to adapt as needed during the forecast period.
The stable outlook reflects our view that the port’s credit profile will remain stable over the next 12 to 18 months. A strong financial position, supported by robust cash flow and liquidity, along with elevated volume and incremental capacity to facilitate growth will contribute to stable performance.
FACTORS THAT COULD LEAD TO AN UPGRADE OF THE RATING
– At Aa2, GPA is currently our highest rated port, along with the Port of Los Angeles and Port of Long Beach. The rating is unlikely to be upgraded due to operational risks inherent in the business, but upward pressure could result from material improvement in the port’s market position and financial profile.
FACTORS THAT COULD LEAD TO A DOWNGRADE OF THE RATING
– A material, and sustained, adverse change in the existing trading regime that results in significantly lower revenues or volumes for the port.
– Significant deterioration of the port’s competitive position, reflected in reduced market share in non-discretionary and discretionary cargo segments and a sustained period of cargo growth meaningfully below the sector average.
– Weakened financial position reflected in a sustained period of DSCRs below 3x and days cash on hand below 500.
The bonds are secured by a first lien on net revenues of port facilities, on parity with the Series 2021 Bonds. Bondholder protections include a 1.25x net revenue rate covenant and additional bonds test. The resolution provides that GPA can elect to fund a debt service reserve account for each bond series; GPA will not fund a debt service reserve account for the Series 2022 Bonds.
USE OF PROCEEDS
Proceeds will be used to fund the expansion and redevelopment of the Ocean Terminal from a general cargo to primarily a container handling facility. Planned projects include the reconfiguration of berths 12 & 13; the purchase of seven new ship-to-shore cranes; and redevelopment of a portion of the Ocean Terminal container yard.
The Authority is an instrumentality of the State. The Authority owns and operates deep water port terminals in Savannah and Brunswick, an inland terminal in Bainbridge, and an inland rail terminal near Chatsworth. The Port of Savannah is the third-largest container gateway, and the Port of Brunswick is the second-largest auto port, in the US.