Moody's Assigns Panama Canal A2 Rating

Maritime Activity Reports, Inc.

December 22, 2016

Panama Canal Photo Panama Canal Authority

Panama Canal Photo Panama Canal Authority

Today, Moody's credit rating agency announced that it has assigned an A2 rating to the Panama Canal Authority (ACP) for its business model, unique geographic advantage, and historically strong operational and financial performance.
 

Moody's expects this performance to continue into the future, supported by the robust institutional framework and corporate governance under which the ACP operates.
 
In its report, the credit rating agency highlighted that one of the ACP's largest financial strengths is its “clear legal and institutional framework,” which supports a reliable and stable operating environment for the entity moving forward. They also noted that the ACP's assigned rating is just above Panama’s country ceiling of A3, reflecting the Canal's long history of operating in an environment free of political interference.
 
Moody's expects this model to continue due to ACP's solid corporate governance, as well as rules that ensure the maintenance of a prudent business management.
 
According to the report, the ACP is further protected from political intrusion on its operations and finances, because it is constitutionally prohibited from receiving financial support from or lending funds to the government of Panama, as well as selling or pledging any ACP assets or revenues. Additionally, the ACP is constitutionally mandated to maintain and manage a separate budget from the government.
 
Moreover, Moody’s attributed its rating to the ACP's financial health, which depends more on the global economy than the country’s, further insulating the ACP from risk and the fluctuations of the local market. The ACP has a history of ample liquidity that gives it flexibility in times of deteriorating economic circumstances.
 
The rating comes six months after the inauguration of the Expanded Panama Canal. Since then, more than 500 vessels have transited the Expanded Canal, including container ships, liquefied petroleum gas (LPG) carriers, vehicle carriers, tankers and liquefied natural gas (LNG) carriers—a new market segment for the Canal. The significant demand shown by the maritime industry and the high ratings the Canal has received this year reinforces the world’s trust and value in the Panama Canal, its potential and the benefits it brings to global commerce.
 
In recent months, the Panama Canal has also received positive ratings issued by Fitch Ratings and Standard & Poor's (S&P) Global Ratings on the performance and outlook for the Panama Canal.
 
In September, Fitch Ratings affirmed the ACP's Long-Term Issuer Default Rating (IDR) of 'A', reflecting the ACP's solid revenue profile and low leverage levels. In August, S&P Global Ratings affirmed its 'A-' long-term corporate credit and debt ratings of the ACP, reiterating the agency's trust in the investment, management, operation of the Panama Canal.
 

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