Fitch Ratings affirmed its long-term "A" rating of the Virginia Port Authority’s outstanding port facilities revenue and refunding bonds. It termed the rating outlook "stable."
The strong rating of VPA’s credit will enable it to borrow the funds needed to build a new container terminal on Craney Island.
Fitch expects VPA to borrow for its $6 billion master plan through 2040. “While a large portion of the plan is expected to be funded with appropriations and pay-go funds, revenue bonds, commonwealth port fund bonds, and subordinate equipment lease purchases make up nearly half of the sources of funds. Should incremental throughput and revenues fail to grow as the authority expects, this additional debt burden may pressure coverage levels and financial flexibility over time,” Fitch said.
In affirming the VPA’s ratings, Fitch cited its “consistently sound historic financial performance evidenced by a cash funded debt service reserve of $25 million, four months cash on hand, senior debt service coverage of two times or better on a net revenues basis, no swap or variable rate exposure, and a demonstrated willingness on the part of management to control operating expenses through the recent downturn.”
It also cited the port agency’s long-term contracts with large customers and said shipping lines with 10-year contracts accounted for 90 percent of container EU throughput and 80 percent of revenues in 2010. It also said the recent 20-year lease of the APM Terminal in Portsmouth provides improved revenue and throughput stability going forward.
It said the diverse mix of both shipping lines and trading partners minimizes potential concentration risk on cargo volumes.
Fitch said the VPA’s rating in future will be impacted by the resilience of throughput levels, management's continued ability to control operating expenses, and the port's ability to compete for cargo on competitive East Coast shipping routes.