Port Financing: Hawaii

 

Fitch Ratings has upgraded the Hawaii Department of Transportation Harbors Division’s ("Harbors Division") revenue bonds Series 2010 A and 2010 B rating to ‘AA-’ from ‘A+’ and revised its Outlook to Stable from Positive. This is the second revenue bond rating upgrade Fitch has issued for the Harbors Division over the past two years.

 

"Fitch’s upgrade of the Harbor Division’s bond rating – the second over the past two years – is great news and reaffirms the strong fiscal policies for which my administration has advocated," stated Gov. David Ige. "This allows us to issue our bonds at lower interest rates, increasing our buying power and providing the tools to undertake and complete statewide construction and upgrade projects, like the Kapalama Container Terminal, that ensures the continued delivery of goods that are essential for Hawaii’s communities."

 

"We’ve focused our attention on changing the manner in which we finance our projects as a means of completing necessary statewide upgrades and construction projects more efficiently," stated Harbors Division Deputy Director Darrell Young. "By utilizing a cash financing program, we’ve been able to delay the issuance of new bond debt and to put more of our available funds directly into our Harbor Modernization projects instead of using those funds to pay for additional debt service."

 

"The upgrade reflects the harbor system’s continued strong financial performance in terms of coverage, liquidity, and leverage. Favorable metrics are driven by positive operational activities and enacted tariff adjustments, providing cash funding for the multi-year capital program in addition to anticipated additional borrowings.

 

The rating reflects the harbor system’s natural monopoly position serving the islands of Hawaii. The system benefits from stable volume growth since 2011 along with implemented multi-year tariff rate increases that provide revenue stability. Despite a sizeable capital plan that calls for additional borrowing, the harbor system is expected to maintain its historically robust financial profile with strong coverage, relatively low leverage, and high liquidity providing over 1,000 days cash on hand (DCOH). Recent coverage levels have been above 3.0x while leverage has been trending downward to below 1.0x," stated the Fitch Ratings news release.