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Fitch Affirms Broward County, Florida Port Facility Revs at 'A'

Posted on: Wednesday, 5 December 2007, 18:00 CST

Fitch Ratings affirms the underlying rating on Broward County, Florida's $159 million Port Facilities Revenue Refunding Bonds, series 1989A and Series 1989B, and $73 million Port Facility Improvement Revenue Bonds, series 1998C at 'A'. The bonds are secured by net revenues from Port Everglades (PEV or the port). The Rating Outlook is Stable.

The 'A' rating reflects the port's diverse business lines - cruise ship operations, container traffic and petroleum distribution, stable financial performance, and wealthy and growing service area. Offsetting credit factors include the highly competitive operating environment in South Florida, moderate concentration in terms of trade partners with Latin America and the Caribbean, and the port's sizeable 2007-2012 capital improvement plan (CIP) which totals $457 million in project costs. PEV operates as a landlord port, generating revenues through long-term leases with terminal and container ship operators. Furthermore, port's petroleum facilities are privately-owned and operated, and PEV collects fuel pumpage and dockage fees for all petroleum transferred through the port whereas the port owns its cruise facilities.

Financial operations have been stable at the port. In 2006, cruise revenues accounted for 26% of total operating revenues, followed by container revenues accounting for 24% and petroleum revenues at 21%. Overall, operating revenues have increased steadily, by 4% annually from fiscal 2002 through fiscal 2006. This increase was due to a 9% increase in container traffic and 2% increase in petroleum activity during the same period. However, operating expenses have outpaced operating revenues, increasing by 7% on average annually during the 2002-2006 time period, which is attributable to costs related to increased activity and additional security requirements. Healthy annual financial results and stable debt service resulted in increased debt service coverage in fiscal 2006 of 2.01 times (x) on the senior lien bonds and overall debt service coverage of 1.74x on the senior and subordinate bonds (not rated by Fitch), slightly up from 1.73x in 2005. In 2007, the port expects total debt service coverage will substantially increase to 2.24x, which is driven by an increase in operating revenues and higher earnings on interest income. In addition, the rating also incorporates an affluent and growing service area which provides strong demand for goods and petroleum, and the port's solid liquidity levels. In May 2007, the service area reported an unemployment rate of 2.9%, well below state and national averages, and 9.5% population growth. As of the end of June 2007, current assets totaled approximately $173 million, although the port intends to use a large portion of these funds for pay-go capital investments.

Credit concerns include the competitive east coast seaport environment, specifically, the south Florida region, the port's moderate concentration and historical reliance on trade with Latin America and the Caribbean, and the large $457 million CIP. Port Everglades competes with the Port of Miami and the Port of Canaveral (rated 'A-', Stable Outlook by Fitch) for cargo and cruise ship operations as well as the Port of Palm Beach (Rated 'A-', Stable Outlook by Fitch). Port Everglades' cargo operations benefits from being the State's largest receiving and storage center for petroleum as well as the exclusive importer of jet fuel for three regional international airports. However, the port remains vulnerable to the cyclical nature of the cruise industry and competition from other nearby ports offering similar cruise packages. Fitch also notes the moderate risk in terms of trading partners, since South America and the Caribbean account for approximately 70% of the port's cargo. Lastly, the port's 2007-2012 CIP is costly and incorporates cruise terminal expansions, improved intermodal connectivity, and a dredging program to accommodate larger ship vessels. Primary funding sources for the CIP include internal operating funds (35%), bond proceeds (17%), and State Grants (11%).

Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.

Source: Business Wire

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