Peer Review of U.S. Ports

Transcription

1 ttribute ssessments, Metrics, and Ratings

2 nalysts Emma Griffith Seth Lehman Zane Latham Charles skew Inside Page Overview... 2 ttribute ssessments... 3 Revenue Risk Volume... 3 Revenue Risk Price... 4 Infrastructure Development/Renewal... 5 Debt Structure... 6 Debt Service... 6 Conclusion... 7 ppendix : Global Rating Rationale for Ports... 8 ppendix B: Definitions... 9 ppendix C: Port ttribute ssessments ppendix D: Port Statistics Editorial dvisers Executive Paul Taylor President, Chief Executive Officer Editorial Carrie. Peinado, Senior Editor manda Muller, Desktop Publishing Specialist Publisher John Forde, Managing Director Related Research Fitch Fundamentals Index U.S. Index Trend nalysis 1Q14 (pril 2014) Global Infrastructure & Project Finance U.S. Transportation Trends Spring 2014 (May 2014) Fitch: Panama Canal Delay May Postpone Rise in US Throughput (January 2014) 2014 Outlook: U.S. Transportation Infrastructure (Stable with Some Macro Challenges) (December 2013) Related Criteria Rating Criteria for Ports (October 2013) 1

3 Summary This report highlights the operating and financial performance of Fitch-rated U.S. ports. These benchmarks are used for determining attribute assessments. The report utilizes seven statistics and ratios that are calculated from the most recent annual audited financial statements or from supplemental data received directly from the port. port s financial metrics, relative to Fitch-designated peer groups, constitute an important component of Fitch Ratings credit analysis. The report focuses on U.S. ports with a stand-alone pledge of port revenues. Consolidated entities with primary business lines other than port activity (including airport and/or toll facility operation) are not included in this comparative analysis, nor are facilities whose debt is primarily covered by tax revenues. list of Fitch-rated consolidated and tax supported ports is included in ppendix C. Overview The is an annual, point-in-time assessment of Fitch-rated ports. Ratios for each issuer are determined using audited information or additional information received from the issuer, as well as circumstances unique to the credit. Fitch seeks to highlight these metrics in the reports and press releases published during the rating process for the benefit of the reader. Key Rating Drivers: Fitch s rating criteria for ports identifies five key rating drivers implicit in all port ratings: the characteristics of cargo volume (volume), as well as local and transit markets served by the port; contract or tariff mechanisms that allow a port to maintain its revenue base irrespective of throughput levels (price); the port s approach to infrastructure renewal and development; the financial risk associated with the port s debt structure; and the level of financial flexibility (debt service). For the first four rating drivers, Fitch assesses attributes as being stronger, midrange, or weaker. Qualitative assessments are informed by quantitative metrics that are examined based on both their historical and projected evolutions, not simply a standalone calculation. The fifth key rating driver, debt service, considers metrics for liquidity, debt service coverage and leverage in the context of the overall risk profile determined by review of the other key rating drivers. Metrics are considered both by rating category and across the sector (see ppendix D). Comparability of Ratings: ttribute assessments help frame port credit ratings and provide a standard way of comparing U.S. ports, as well as with other infrastructure assets, both domestically and across the globe. This report seeks to highlight the distribution of these attribute assessments for the scored key rating driver by rating for stand-alone U.S. ports covered by Fitch. The report also provides an indication of the relative significance of the rating drivers, explaining conditions that may lead to one driver s outweighing the others, resulting in a higher or lower rating than may otherwise be expected based on relative franchise strength alone. Specific examples of what constitutes a stronger, midrange and weaker assessment for each attribute are also provided. The chart below shows the distribution of Fitch s stand-alone U.S. port ratings. Please refer to ppendix C for a full listing of the ratings and attribute assessments as of. Fitch U.S. Port Ratings (No. of Ratings) BB Performance Highlights Rating ctivity Since the 2013 publication of the, Fitch has taken one positive outlook revision (labama State Port uthority, Outlook to Positive from Stable). One new port rating has been added to the sector (Port Miami/), while another port has a new rating for its subordinate lien (Port of Long Beach/subordinate lien ). 2

4 One port credit included in the 2013 publication paid off its outstanding rated debt in pril 2014 (Tri-City Regional Port District) and, as a result, is no longer included in the portfolio of U.S. ports. The category remains the most common rating level for stand-alone U.S. ports, reflecting the sector s relatively low credit risk and the resilience of cash flows despite volume fluctuations during economic downturns. Highest rated ports are typically those with a strong underlying market or franchise driving demand, overall stability of cash flows through contractual agreements, or tariff policy and healthy financial metrics. Weakest rated ports include those serving weaker markets with competition for cargo, less contractual protection for revenues, or thinner financial metrics. With approximately 95% of port sector ratings maintaining Stable Outlooks, Fitch expects stable rating trends in the near to immediate future. ttribute Scores Fitch revised three attribute scores since the last peer review was published. For the Infrastructure-Development and Renewal attribute, Broward County Port Everglades score was revised to stronger from midrange, reflecting the port s access to substantial cash balances and expected generation of healthy excess cash flow to defray a sizable portion of the costs for its current capital plan. Canaveral Port uthority s score for the same attribute was revised to midrange from stronger, reflecting an elevated capital program from prior years and a resulting increase in expected additional borrowing. The debt structure score for Jacksonville Port uthority was revised to stronger from midrange, which reflects its variable-rate exposure is synthetically fixed. None of the changes resulted in rating revisions. ll attribute adjustments affected port credits in the category, resulting in a slight increase in overall stronger attribute scorings for these credits. Fitch also assigned attribute scores to the two new credits added to the sector (Port Miami and Port of Long Beach subordinate lien). Port Miami s assigned scores are consistent with the port s rating level. Port of Long Beach s new subordinate lien was assigned a midrange score for debt structure, as opposed to stronger for the senior lien, reflecting the combination of lower covenant levels and the lack of an upfront funded debt service reserve. Fitch believes it is unlikely to see significant attribute scoring adjustments in the near term ttribute ssessments Revenue Risk Volume: Market Risk and Cargo Characteristics The Revenue Risk Volume attribute considers a port s access to local and more distant inland/transit markets, both independently and relative to potentially competing facilities. Fitch s rated U.S. ports cover a wide range of throughput volumes and cargo mixes, from the international container gateways of Long Beach and Los ngeles in California s San Pedro Bay to specialized inland facilities or monopolistic island port systems. pproximately 62% of Fitch-rated U.S. ports have a midrange assessment for this attribute. Of the remaining credits, 19% were assessed stronger while 19% were assessed weaker. ssessments for the volume attribute broken out by rating are illustrated below. Volume Stronger (% of Total = 18.8) 33% 67% Volume Midrange (% of Total = 62.5) 10% 90% Volume Weaker (% of Total = 18.8) BIG 33% 67% Ports with stronger assessments for this attribute are typically primary ports of call with a stable demand profile in their local market and strong competitive position in the supply chain, which allows them to compete for transit or discretionary cargo flows. In Fitch s view, stronger ports will be more insulated from substitution, either because of scale, location, connectivity, or a combination of these factors. Fitch looks for diversity in cargo types, business lines and/or customers to stabilize throughput volumes, as well as the share of high-value cargo being handled at the facility. While cargo concentration may be elevated in some cases (e.g. high exposure to containerized cargo versus an even split between container, bulk/breakbulk and passenger throughputs), Fitch may view 3

5 higher assessments as warranted by the importance of these ports as primary points of entry for international cargo, or their essential/monopolistic nature in the market that they serve. This dynamic may be evaluated based on a port s market share relative to competing facilities. Ports with exceptional ingress/egress infrastructure, efficient access to onward modes of transportation and multimodal capability also serve a broader strategic role to the national logistics network and are viewed favorably. Fitch assesses both ports (Los ngeles and Long Beach) rated with stronger attribute scores for volume. The only other port with a stronger attribute score in this key rating driver is Hawaii, reflecting the monopolistic geographical location and essentiality of the port system in a state without alternative means of surface transport for goods. Revenue Risk Price: bility to Stabilize Cash Flows This attribute largely focuses on a port s contractual and/or economical ability to insulate its revenue profile from volatility on the throughput side. This may include management s flexibility to raise tariffs and fees, allowing the port to raise revenues and protect cash flow generation, limiting the exposure to throughput declines in response to volume changes. The ability to maintain ongoing revenue stability, regardless of volume shifts, may be supported by long-term contracts, including minimum annual guarantees (MGs) or similar take-or-pay arrangements, or shorter-term agreements. Operator ports may have less contractual restrictions to modify rates; however, a port s ability to negotiate contracts and overall pricing power may be limited by its competitive position. Fitch evaluates contractual agreements/regulatory frameworks to determine the cost recovery allowed, with a higher percentage of pass-through equating to a stronger attribute. The relatively large representation of midrange assessments for this attribute reflects the characteristics of many of the rated U.S. stand-alone ports as midsize or secondary ports of call, with a higher exposure to, or greater competition for, discretionary cargo that could be handled by a competing facility. In Fitch s opinion, several of the Gulf Coast and East Coast ports exhibit these characteristics, with multiple ports of similar size in the vicinity and modest local demand for cargo. Price Stronger (% of Total = 25.0) 50% Price Midrange (% of Total = 62.5) 20% Price Weaker (% of Total = 18.8) BIG 50% Ports with a score of midrange may also be indicative of exposure to commodities or business lines that are viewed as volatile, including certain raw materials and tourism-linked businesses, impacting a relatively large percentage of revenue. Midrange attribute scores for certain ports may be reflective of some access limitations and/or some limits to multimodal capability. Ports with modest levels of throughput volumes or a narrow cargo profile, but with favorable niche franchise characteristics, may also be deemed midrange. Ports with weaker attribute assessments generally have demonstrated a higher degree of throughput volatility, are at elevated risk to competition from nearby port facilities, or are constrained by the size and scope of their franchise. Fitch expects assessments for this rating driver to remain largely unchanged over the foreseeable future. Factors that may alter this expectation could come from any meaningful changes in the balance of trade as the Panama Canal expansion comes online and as shippers adjust sailing schedules to reflect larger ships, alliances, fuel prices, freight rates, or other factors. Fitch monitors annual and monthly throughput data (where available), and will revisit a port s assessment for this attribute as necessary. 50% 80% 50% ssessments for the price attribute broken out by rating are illustrated above. pproximately 25% of U.S. rated ports are viewed to have a stronger attribute assessment in this category. Ports with a stronger assessment score maintain robust contractual agreements with many leading users/tenants and can demonstrate a relatively low degree of revenue volatility despite changes in throughput levels. This may be achieved through MGs or long-term agreements (10 years or longer) that cover the majority of operating revenues. In addition to ports (Los ngeles and Long Beach) rated, Fitch also assesses Miami and Virginia as stronger for Revenue Risk Price. These scores reflect the sizable MGs on a forward-looking basis, covering nearly 70% of operating revenues at both Miami and Virginia, providing a stable floor for revenues. 4

6 Similar to Revenue Risk Volume, the majority of Fitch-rated ports, approximately 63%, achieved a midrange assessment for Revenue Risk Price. With few exceptions, ports with a midrange or better assessment on this attribute benefit from MGs that cover 50% or greater of their operating revenues. These sizeable guarantees serve to soften the blow of throughput volatility on the volume side. Concentration of MGs in the hands of a small number of counterparties may be a point of concern, somewhat dampening their mitigating effect on volume risk. lack of MGs or long-term lease or volume-based contracts can be mitigated by a counterparty s long operating history at the port. Fitch also recognizes that in many cases, private counterparties are replaceable when a port is viewed as providing critical infrastructure, and in these cases, a competitor may backfill any excess capacity; however, this depends on the competitive position of the port and the markets it serves. Two U.S. ports (labama State Port uthority and Commonwealth Port uthority) were assessed as weaker for this attribute. These ports are generally characterized by contractual frameworks that may limit their ability to insulate revenues from fluctuations in cargo volumes under stressful scenarios. In addition to lacking MG protections for cash flows, these ports may suffer from a history of volatile behavior by counterparties that constrain the attribute score. Infrastructure Development/Renewal: Capital Improvement Planning and Funding Sources The Infrastructure Development and Renewal Risk attribute considers the approach and size of the port s capital improvement program (CIP), diversity in funding sources, history of successful CIP projects, stakeholder support for the CIP and condition of facilities. The most common assessments for this attribute are midrange and stronger, with only one rated port falling in the weaker category. Ongoing reinvestment ensures the attractiveness of facilities to shippers and other port counterparties, thus helping to maintain efficient use of port facilities. Regular funding of reinvestment needs through a well-managed capital budgeting process can smooth out required increases in tariffs and also smooth annual debt service coverage and leverage ratios. Fitch considers the level of reinvestment assumed in a port s CIP to determine whether sufficient funding exists to meet these needs. The share of debt funding anticipated for the CIP will also be considered. pproximately 25% of Fitch s rated U.S. ports achieved a stronger score for this attribute assessment. stronger score does not necessarily indicate a state of the art facility, but rather these ports are viewed to have developed well-managed and prioritized CIPs that address both infrastructure renewal needs and capacity enhancements to meet future demand. Fitch views favorably expansion projects that serve clearly established needs and are financially feasible without impairing the port s existing fiscal position. Direct participation in investments from tenants or private sector partners may facilitate capital developments in certain cases and may reduce the risks borne by the port itself. successful track record of past capital programs with evidence of on-time and on-budget project delivery is considered a strength. The attribute assessment is also influenced by the port s level of progress through its existing CIP. Ports that have just completed large capital programs and/or are nearing completion tend to achieve more favorable assessments in this attribute category compared with those that are in earlier stages of the process. Infrastructure Stronger (% of Total = 25.0) 75% 25% Infrastructure Midrange (% of Total = 68.8) 27% BIG 9% Ports with a midrange attribute assessment, or 69% of Fitch s rated U.S. ports, have adequate infrastructure in place with capacity to meet future long-term demands. Midrange assessments span all rating categories for U.S. ports from to below investment grade. Typically, Fitch will arrive at a midrange assessment when a CIP is moderate in size and manageable from the perspective of additional leverage requirements, though there may be some uncertainty regarding the exact level of investment needed, specific sources of funding, or the involvement of existing lessees. reasonable plan with a large expectation for leverage may also bring an attribute assessment from stronger to midrange. Only one U.S port currently has an assessment of weaker in this category: San Francisco, which has a unique situation with sizable 9% 55% Infrastructure Weaker (% of Total = 6.3) 100% 5

7 maintenance requirements and sources for the majority of the funding still to be determined. Fitch s review of capital plans assesses those projects that may be speculative in nature with regard to new users or noncontracted throughput. Such developments can be positive when pursued jointly with the backing of an invested counterparty; however, if a port were to move forward with a CIP either not supported by its counterparties or heavily dependent on speculative demand growth, this will likely result in a lower attribute assessment for Infrastructure Development/Renewal. Fitch generally expects assessments for this rating driver to remain largely unchanged over the next three to five years given the long-term nature of capital program development. Debt Structure: Risk Derived from Debt Structure ssessments for debt structure encompass several elements of the port s debt profile, including the allocation of fixed- and variable-rate debt relative to the overall capital structure and the debt repayment profile in terms of maturity length and amortization. Ports assessed as stronger in this category maintain conservative capital structures characterized by a high percentage of fixed-rate obligations with fully amortizing debt. The average assessment for this attribute is higher when compared with the other key rating drivers described in this report. s indicated in the charts on the right, assessments were split between the midrange and stronger attributes, with no U.S. port receiving a score of weaker. Debt Structure Stronger (% of Total = 81.3) 15% BIG 8% 15% 62% Debt Structure Midrange (% of Total = 18.7) 33% 67% pproximately 81% of Fitch s rated U.S. ports fall into the stronger category for this attribute, reflecting the high level of fixed-rate, fully amortizing debt and limited market risk currently in the industry. Ports in this category have either little to no variable-rate or refinance exposure or have limited their exposure by synthetically fixing their debt. Fitch assigns approximately 19% of rated U.S. ports as midrange on the debt structure attribute. Ports with the midrange category have between approximately 30% 40% variable-rate debt exposure and in certain cases limited required cash reserves. Variable-rate debt and refinance exposure are not the only elements that drives the Debt Structure attribute assessment. Structural terms and reserve requirements are also considered. In cases where no formal debt service reserve is required by the bond documents, a strong liquidity position is viewed as essential in order to compensate for the lack of formal reserves. Fitch expects assessments for this rating driver to remain largely unchanged for the foreseeable future given that most U.S. ports are likely to maintain their conservative debt structures. Nonetheless, debt structure attribute scores are subject to change should a port change its capital structure or financial risk profile. Debt Service: Risk ssociated With Debt Burden This attribute considers several important financial metrics including liquidity, debt service coverage and leverage. Unlike the other rating drivers, Debt Service is not scored independently, but rather considers the credit s overall risk profile in the context of the aforementioned metrics, determined by review of the previous four key rating drivers. port with primarily midrange characteristics may be rated in the category with debt service coverage ratios of between 1.20x 1.40x in the rating case, and below investment grade with coverage ratios below 1.20x. Moreover, a project s rating may be constrained by a weaker assessment on a key rating driver notwithstanding coverage ratios of 1.20x and higher. The following indicators are used in this evaluation: net debt to cash flow available for debt service (CFDS), debt service coverage ratio and days cash on hand (DCOH). In evaluating port leverage, Fitch looks at the projected evolution of the net debt-to-cfds ratio. Leverage is assessed relative to the size of a port s earnings as well as the scale and stability of operations. port s leverage is assessed on where it stands at the time of review as well as how it will evolve over the next several years. These metrics are compared with peer credits. Debt related to infrastructure investments is often issued some time before tariffs can be increased to recover costs. This lag may result in temporary increases in leverage; Fitch accounts for this analytically by considering the evolution of leverage over the next five years. To the extent leverage is expected to migrate downward, the credit is assessed in 6

8 part based on this projected downward evolution. Miami and Virginia are two ports where leverage is high relative to peers today, but is forecast to decrease over the next five years. Similarly, should sizable borrowing plans be on the horizon, these will be taken into account in evaluating leverage expectations within the forecast period. Examples of ports where leverage is expected to migrate up include Port of Long Beach and Port Everglades. Ports that have exhibited a checkered past in terms of their financial or operating performance, such as Port of Palm Beach, may be viewed with extra caution even as their financial and operational metrics begin to improve. Medians re Not Targets While this peer study includes median calculations for financial ratios by rating category, these should not be construed as targets for specific ratios or ratings. s mentioned, Fitch does monitor projected evolution of certain metrics and CIP development, but the medians shown in ppendix D reflect a single point in time. Rating changes of individual ports may affect medians based on rating categories. ppendix D highlights several metrics that are used in evaluating debt service, including DCOH, leverage and coverage. When considering medians for these metrics by rating category, higher rated credits show consistently better scores higher coverage, lower leverage and higher liquidity than lower rated credits. However, the overall metrics are relatively strong across U.S. rated ports, which supports the strong investment-grade ratings seen in this sector. Conclusion The port rating criteria provides a structured, analytical approach with a focus on key rating drivers. Fitch conducted a detailed portfolio review of its rated U.S. standalone ports to determine attribute assessments for each category. Reviews of all rated ports are conducted at least once annually. s noted in the analysis above, the assessments in most categories were predominantly stronger or midrange, which is consistent with the generally strong credit characteristics and investmentgrade rating levels seen for most port credits in the U.S. Fitch will assign attribute assessments for each new port rating and will similarly monitor existing attribute assessments as part of its ongoing rating surveillance. ttribute assessments are published in Fitch s rating action commentary for each port. To the extent an adjustment to an existing assessment is determined to be appropriate, Fitch likewise publishes the change as part of its rating action commentary. In some cases, attribute assessment adjustments may lead to rating actions, depending on the underlying reasons for the change and the relative significance of the attribute being adjusted. For a detailed description of the attribute drivers, see ppendix ; for attribute assessments by port, see ppendix C; and for key statistics by port, see ppendix D. 7

9 ppendix : Global Rating Rationale for Ports Description Stronger Midrange Weaker Revenue Risk: Volume Revenue Risk: Price Infrastructure Development/Renewal Debt Structure Characteristics of local and transit markets and port location. Characteristics of cargo handled at the port. Primary port of call. Stable demand from local market, strong competitive position in supply chain. Diversity of business lines, cargo types, and/or customers. High value cargo. Good ingress/egress with efficient access and multimodal capability. Secondary port of call. Higher exposure/ greater competition for transit cargo. Some reliance on particular business lines, cargo types, or customers. More exposure to volatile commodities or cargo types. Fair ingress/egress with some access limitations and/or some limits to multimodal capability. bility to maintain revenues irrespective of throughput volumes, either through contractual measures or tariff flexibility. Strong historical revenue stability. Long-term leases and minimum guarantees in place to limit exposure to trade volatility. Stable margins demonstrating ability to recover costs independently of volumes over time. Moderate historical revenue stability. Shorter leases and/or more limited guarantees. Some variability in margins and cost recovery over time. Smaller port of call. Weaker historical revenue stability. Highly concentrated business lines, cargo types, or Short or month to month leases, no minimum customers. guarantees in place. Elevated exposure to competition for cargo or Volatile operating margins and variable cost extremely specialized cargo types. recovery. More limited market access. Ingress/egress limitations, some inadequate infrastructure. Relevant Cargo breakdown (%). Benchmarks Share of cargo destined for local consumption versus transit cargo. Concentration of tenants. Tenant lease terms. MG as % of total revenues. EBITD or operating margin volatility through cycle. pproach to capital program, including planning, funding sources, management. Risk derived from debt structure, including exposure to floating interest rate, index-linked rate, maturity profile, refinance risk, structural terms/reserves. Strong mechanisms for capital improvement Senior debt. planning (CIP) and funding, experienced Fully amortizing debt. ny floating-rate debt is fully counterparties managing process, good dialogue hedged with a highly liquid swap. with shippers, railroads and community. Strong structural features including 12-month Significant investments by high-quality tenants. DSR and robust lock-up requirements. ccess to high levels of excess cash flow or Stable and gradually increasing DSCR profile. external funding to maintain assets. Port capacity well above medium-term throughput forecasts. Moderate mechanisms for planning, uncertainty regarding needed level of investments or involvement of existing lessees. Some [speculative] enhancements at port expense. Less meaningful investment by tenants/operators, or investment that is easily replaceable. ccess to moderate levels of excess cash flow or external funding to maintain assets. Port capacity requires some expansion or refurbishment to accommodate medium-term throughput forecasts. Weak planning mechanisms, history of deferred maintenance and/or cost overruns. Low to no investment from tenants/operators. Limited access to excess cash flow or external funding to maintain assets. Significant speculative investment planned or undertaken. Port capacity requires large expansion or refurbishment to accommodate medium-term throughput forecasts. CIP size and dependence on future growth. Mix of funding sources (private, grants, bonds). Relationship with owners. Minimum contracted returns or reasonable forecasts. Low exposure to refinancing risk. Limited exposure to floating interest rates. dequate structural features including six-month DSR. Stable DSCR profile with some pinch points. Material refinance risk exists. Significant exposure to floating interest rate. DSR and other structural features provide limited margin of protection. DSCR profile volatile. Subordinated debt. Reserving provisions. Lifecycle cost schedule. Proportion of fixed to floating interest rate, proportion of inflation indexation in revenue as compared to costs. DSCR LLCR Shape of ratio profiles. % subject to refinance risk. Rate covenant. Leverage limitation. Cash lock-up provisions. FMV of derivative position. DSCR/LLCR/ICR Days Cash on Hand Debt/CFDS LLCR Loan life coverage ratio. ICR Interest coverage ratio. CFDS Cash flow available for debt service. Note: Debt Service: This key rating driver considers metrics for liquidity, debt service coverage and leverage in the context of the overall risk profile determined by review of the other key rating drivers. port with primarily midrange characteristics could be rated in the category with debt service coverage ratios of between 1.20x 1.40x in the rating case, and below investment grade with coverage ratios below 1.20x. Moreover, a project s rating may be constrained by a weaker assessment on a key rating driver notwithstanding coverage ratios of 1.20x and higher. 8

10 ppendix B: Definitions Senior/Subordinate Lien Debt Service Coverage Ratio (DSCR): Total operating revenues minus total operating expenses net of depreciation, divided by senior/subordinate lien debt service. vailable revenues may include non-operating revenues such as funds legally available to provide extra coverage under the bond/loan documents. Operating Ratio: Total operating revenues minus total operating expenses net of depreciation, divided by total operating revenues. Non-operating sources of income, such as operating grants, are excluded from this ratio. EBITD or CFDS: Earnings before interest, taxes depreciation, and amortization or cash flow available for debt service (i.e. pledged net revenues). Days Cash on Hand: Unrestricted cash and investments divided by daily cash operating expenses. Calculation may also include pertinent reserve funds such as Operating and Maintenance Reserve. This metric is a measure of unrestricted liquidity levels. Net Debt/CFDS: Gross debt less unrestricted cash balances and debt reserve funds divided by CFDS. MGs: Minimum annual guaranteed revenues to be paid by a port user, even if usage is less than anticipated. The MG is typically established under a long-term arrangement, for example, a lease or a take-or-pay contract. 9

11 ppendix C: Port Ratings and ttributes Port Rating Outlook Revenue Risk: Volume Revenue Risk: Price Infrastructure Development/Renewal Debt Structure Category Harbor Department of Los ngeles Stable Stronger Stronger Stronger Stronger Port of Long Beach / Stable Stronger Stronger Midrange Stronger/Midrange Category San Diego Unified Port District + Stable Midrange Midrange Stronger Stronger State of Hawaii (Dept. of Transportation) + Stable Stronger Midrange Midrange Stronger Broward County-Port Everglades Stable Midrange Midrange Stronger Stronger Canaveral Port uthority Stable Midrange Midrange Midrange Stronger Hillsborough County Port District (Tampa Port uthority) Stable Midrange Midrange Stronger Midrange Jacksonville Port uthority Stable Midrange Midrange Midrange Stronger Port Miami Stable Midrange Stronger Midrange Midrange Port of Beaumont Navigation District Stable Midrange Midrange Midrange Stronger San Francisco Port Commission Stable Midrange Midrange Weaker Stronger Virginia Port uthority Stable Midrange Stronger Midrange Stronger Category labama State Port uthority + Positive Midrange Weaker Midrange Stronger North Carolina State Ports uthority + Stable Weaker Midrange Midrange Midrange Port of Palm Beach Stable Weaker Midrange Midrange Stronger Below Investment Grade Commonwealth Port uthority (Northern Mariana) BB Stable Weaker Weaker Midrange Stronger Note: The green text indicates a positive change since last year s peer review. Red text indicates a downward change since last year s peer review. This report focuses on U.S. ports with a stand-alone pledge of port revenues. While not included in the report, Fitch also rates several consolidated entities with primary business lines other than port activity (including airport and/or toll facility operation) as well as ports where debt is backed by tax revenues. Examples of ports whose obligations are primarily covered through tax revenues include the Port of Houston uthority (unlimited general obligation bonds /Stable) and Manatee Port uthority in Manatee County, FL (revenue refunding bonds +/Stable). Consolidated entities include the Port uthority of New York and New Jersey (consolidated bonds rated /Stable and commercial paper notes rated F1+), the Port of Oakland (senior lien revenue bonds rated +/Stable and intermediate lien revenue bonds /Stable), the Port of Seattle (first lien revenue bonds /Stable, intermediate lien revenue bonds +/Stable and subordinate lien revenue bonds /Stable) and the Massachusetts Port uthority (revenue bonds /Stable). 10

12 ppendix D: Rated Ports Selected Metrics Port Rating Outlook Category Cargo (000 TEU) Cargo (000 Tons) Passengers (000) DCOH (Days) Leverage: Net Debt/ CFDS (x) Total DSCR a (x) MG % of Operating Revenues (%) Harbor Department of Los ngeles Stable 7,777 11, Port of Long Beach / Stable 6,648 40,685 N/ Median 7,213 26, Category San Diego Unified Port District + Stable 101 2, (1.8) State of Hawaii (Dept. of Transportation) + Stable 1,317 4,232 1,210 1, Broward County-Port Everglades Stable 928 6,046 3, Canaveral Port uthority Stable N/ 3,874 3, Hillsborough County Port District (Tampa Port uthority) Stable 42 13, Jacksonville Port uthority Stable 927 8, Port Miami Stable , Port of Beaumont Navigation District Stable N.. 3,080 N/ San Francisco Port Commission Stable N.. 1, (0.4) Virginia Port uthority Stable 2, N Median 927 3,477 1, Category labama State Port uthority + Positive ,694 N North Carolina State Ports uthority + Stable 268 5,081 N Port of Palm Beach Stable 255 2, Median 255 5, Below Investment Grade Commonwealth Port uthority (Northern Mariana) BB Stable N N Median Overall Median 914 4, a DSCR per Fitch calculation. TEU 20-foot equivalent unit. DCOH Days cash on hand. CFDS Cash flow available for debt service. MGs Minimum annual guarantees. N.. Not applicable. 11

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Copyright 2014 by Fitch Ratings, Inc., Fitch Ratings Ltd. and its subsidiaries33 Whitehall Street, NY, NY Telephone: , (212) Fax: (212) Reproduction or retransmission in whole or in part is prohibited except by permission. ll rights reserved. In issuing and maintaining its ratings, Fitch relies on factual information it receives from issuers and underwriters and from other sources Fitch believes to be credible. Fitch conducts a reasonable investigation of the factual information relied upon by it in accordance with its ratings methodology, and obtains reasonable verification of that information from independent sources, to the extent such sources are available for a given security or in a given jurisdiction. 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