Moody’s Investors Service has rated the $769 million Georgia Ports Authority (“GPA”) Revenue Bonds, Series 2022 Aa2. The outlook is stable.
The Aa2 rating reflects 1) GPA’s excellent financial flexibility, with strong cash, low debt and a competitive and flexible cost structure; 2) an important position in the market, as a port of entry of national importance with increasing scale and improved infrastructure capacity; 3) above-average growth prospects, driven by favorable regional demographics and continued market share gains; 4) prudent financial management, with strong debt service coverage and solid liquidity that should be maintained through the funding of a major 10-year capital plan; and 5) a supportive governance relationship with the State of Georgia (Stable Aaa), which has included significant direct and indirect support in addition to leadership involvement and alignment on economic development and transportation planning. .
Strong debt service coverage ratios above 5x throughout the forecast period balance volume risk and provide resilience to unforeseen financial challenges. GPA will have to manage a large and multi-faceted capital expenditure plan as it adds significant new capacity over the next 10 years. The authority has successfully delivered several major projects in recent years; the majority of planned expenditures will be financed internally; and the program is expansion-oriented and demand-driven. This confirms our expectation that the plan will be executed as planned and that the authority will retain above average financial flexibility to adapt as needed over 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 solid financial position, supported by strong cash flow and liquidity, as well as high volume and additional capacity to facilitate growth will contribute to a stable performance.
FACTORS THAT CAN LEAD TO AN IMPROVED RATING
– At Aa2, GPA is currently our highest rated port, along with the Port of Los Angeles and the Port of Long Beach. The rating is unlikely to be upgraded due to the operational risks inherent in the business, but upward pressure could result from a significant improvement in the port’s market position and financial profile.
FACTORS THAT MAY LEAD TO A DROP IN RATING
– A material and lasting adverse change to the existing trade regime that results in a significant drop in revenues or volumes for the port.
– Significant deterioration in the port’s competitive position, reflected by a reduced market share in the non-discretionary and discretionary cargo segments and a sustained period of cargo growth significantly below the industry average.
– A weakened financial situation reflected by a prolonged period of DSCR below 3x and days of free cash below 500.
The bonds are secured by a first lien on net port facility revenues, at par with the Series 2021 bonds. Bondholder protections include a 1.25x net revenue rate covenant and a test additional obligations. The resolution provides that GPA may elect to fund a debt service reserve account for each series of bonds; GPA will not fund a debt service reserve account for the Series 2022 Bonds.
USE OF PRODUCTS
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 Piers 12 and 13; the purchase of seven new ship-to-shore cranes; and the redevelopment of part of the Ocean Terminal container yard.
The Authority is an instrument of the State. The Authority owns and operates deepwater port terminals at Savannah and Brunswick, an inland terminal at 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 automobile port in the United States.