Fitch Ratings has assigned an 'A+' rating to $19.3 million of refunding revenue bonds, series 2013 A, issued by the San Diego Unified Port District. In addition, Fitch has affirmed the 'A+' rating on approximately $39.2 million in outstanding revenue bonds, series 2004 A and 2004 B. The Rating Outlook on all bonds is Stable.
KEY RATING DRIVERS:
Mix of Maritime and Real Estate Assets:
The district's assets include real estate holdings in prime tourism/business areas of the city and two niche marine terminals primarily focused on break bulk cargo services. Growth in automobile and specialized equipment handling has been noted. Revenue Risk - Volume: Midrange
Diverse Sources of Revenue:
The maritime and real estate revenue base is supported by long-term fixed rents and concession revenues. Preliminary results for fiscal 2013 indicate fixed rents totaled 28% of operating revenue while concession revenues accounted for about 40% of operating revenues. Revenue performance declined considerably during the recession, though moderate growth has been seen in recent years and is forecast to continue going forward. Revenue Risk - Price: Midrange
Sound Debt Structure: The district's debt is entirely fixed rate with stable annual debt service requirements. Legal provisions include a 1.25x rate covenant and additional bonds require 1.25x coverage of projected maximum annual debt service. A cash funded debt service reserve fund is maintained. Debt Structure Risk: Strong
Limited Future Capital Needs:
Capital needs in the near term are limited and expected to be funded through excess cash and capital reserves. Management indicates the district's 2014-2018 capital plan will require future cash flows of approximately $3 million thru fiscal 2018. Infrastructure and Renewal: Stronger
Strong Balance Sheet Offsets
Overall Constrained Financial Flexibility: Net debt to cash flow available for debt service (CFADS) is cash positive at -2.1x as a result of the strong cash position which also benefits liquidity (346 days cash on hand as of June 2013). Senior debt service coverage levels are sound though all-in debt service coverage is narrower. Operating margins have significantly deteriorated since 2007 as a result of weak economic conditions and cost escalations during the recession, though the district is implementing cost-cutting measures.
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