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to over eight million people within 100 miles of the city, and its
competitive position as the deepest port in Florida support its cargo
and cruise businesses; both have shown modest resilience during the
economic downturn. The port's moderate exposure to the emerging
economies of Mexico and Brazil, the volatile nature of revenue related
to the commodity-based cargo business, and potential fluctuations in the
region's construction sector give the port a somewhat volatile demand
profile.
port revenues, grants and taxes, with only 7% anticipated to come from
debt in the form of the 2015 State Infrastructure Bank (SIB) loan. The
port's credit is further enhanced by the district's ability to levy an
ad valorem tax used to fund capital projects, reducing the dependency on
the port's operations for funding.
Debt Structure: Midrange
Moderate Variable-Rate Debt Component: The port's variable rate debt
accounts for approximately 32% of total outstanding debt, and is hedged
via two interest rate swaps. The current capital structure reflects a
rapid amortization profile over the next eight years. The absence of a
cash funded debt service reserve fund is typically a structural weakness
but is somewhat mitigated by a very strong unrestricted cash position,
with 974 days cash on hand. Balances could be at risk to diminish as the
authority executes its capital program under a scenario of limited grant
funding availability.
Stable Financial Profile: The port's healthy financial performance has
generated strong financial margins averaging 46% since 2000. Net debt
service coverage ratios (DSCR) remained stable through the economic
downturn, remaining at or above 1.5x since 2005 (1.68x in FY 2014) and
expected to remain at that level going forward despite slightly
increasing debt service through 2020. Net debt to cash flow available
for debt service (CFADS) was modest at 1.8x in fiscal 2014.
Peers: Peers include Jacksonville (rated 'A'/Stable Outlook) and Port
Everglades (rated 'A'/Stable Outlook), with diverse cargo profiles and
similar revenue bases. All benefit from MAGs covering roughly 2/3 of
operating revenues, and Port Everglades and Port Tampa Bay have similar
continued growth in the container business under its new agreement with
Mediterranean Shipping Company. Management also notes potential for
growth with the expansion of the Panama Canal and the trend towards
new/expanded shipping alliances, leading carriers to revisit established
networks and itineraries. While uncertain at this time, to the extent
these opportunities are realized, the port would see positive revenue
generation.
Fiscal 2014 debt service coverage increased to 1.68x from 1.55x in 2013
as a result of higher revenues and slightly lower debt service
obligations. Management anticipates coverage may fall to 1.45x in 2015
due to higher debt service and conservative budget assumptions, followed
by improving financial flexibility over time, resulting in 1.58x and
1.73x coverage levels in fiscal years 2016 and 2017, respectively. This
profile anticipates revenue growth of 6% in the later two years based on
realization of positive operating trends, coupled with modest 3% expense
growth and steady debt service requirements around $15 million annually.
Fitch's base case assumes tepid revenue growth of 2%-3% through 2019,
coupled with 3% expense growth. All in coverage remains in the 1.5x
range, reflecting slightly increasing debt service requirements through
MADS in 2020. Reflecting the rapid amortization of the debt profile in
the near term, leverage rises to the 3x range, though this reflects the
full effect of $135 million in cash contributions to the port's capital
program. In a downside scenario which includes a 6% reduction in non-MAG
revenues in 2016 and a 50 bps increase to expense growth, coverage still
remains in the 1.4x range, and leverage in the 4x range. Fitch notes the
port's flexibility throughout the forecast period despite the Port's
Security:
The district's outstanding revenue bonds and senior bank loans are
secured by a parity lien on net revenues derived from port operations.
Under the indenture, property tax receipts are excluded from the
definition of pledged gross revenues.
Additional information is available at 'www.fitchratings.com'.
Fitch Ratings
Primary Analyst
Emma Griffith
Director
+1-212-908-9124
Fitch
Ratings, Inc.
33 Whitehall Street
New York, NY 10004
or
Secondary
Analyst
Tanya Langman
Director
+1-212-908-0716
or
Committee
Chairperson
Seth Lehman
Senior Director
+1-212-908-0755
or
Media
Relations:
Elizabeth Fogerty, +1 212-908 0526
elizabeth.fogerty@fitchratings.com
http://www.reuters.com/article/2015/04/20/ny-fitch-ratings-hillsbo-idUSnBw206747a+100+BSW201
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