Fitch Affirms Alameda Corridor Transportation Auth, CA's Ratings at
'A/BBB+'; Outlook Stable
NEW YORK -- November 30, 2012
Fitch Ratings affirms its 'A' rating on Alameda Corridor Transportation
Authority's (ACTA, or the authority) $993 million senior revenue bonds, series
1999A and 1999C, and affirms its 'BBB+' rating on the authority's $998 million
subordinate revenue bonds, series 1999D, 2004A, and 2004B. The Rating Outlook
on all bonds is Stable. ACTA also has $83.7 million in unrated series 2012
bonds, which are on parity with the rated senior revenue bonds.
KEY RATING DRIVERS:
ECONOMIC ESSENTIALITY: The corridor provides an important intermodal
transportation link, handling approximately 35% of all container throughput
for the two largest container ports in North America (ports of Los Angeles and
Long Beach, both rated 'AA' by Fitch). ACTA is a vital component of the ports'
STRONG COUNTERPARTIES PROVIDING FINANCIAL SUPPORT: In addition to ACTA's own
operating revenues, the ports of Los Angeles and Long Beach provide ACTA with
financial support in case of projected shortfalls to cover debt service
obligations. In both 2011 and 2012, each port paid $2.95 million in such
shortfall advance payments. Savings from refunding certain callable maturities
of ACTA's 1999A senior lien bonds could minimize the need for additional
shortfall advance payments. The two ports have strong financial capacity to
meet their commitments to each, and jointly but not severally, cover up to 20%
of any required annual debt service payments. BNSF and Union Pacific railroads
cover operating costs through separate assessment charges.
HIGH DEBT BURDEN WITH ESCALATING ANNUAL DEBT OBLIGATIONS: ACTA currently has
relatively high all-in leverage of 20x net debt-to-cash flow available for
debt service (CFADS). When including contingent port obligations, the leverage
metric is 14x. Under Fitch base and rating cases, leverage is expected to
decrease over the next five years. Annual debt service obligations grow by 3%
per year over the next five years, placing some pressure on revenue growth.
MINIMAL CAPITAL NEEDS: The corridor has no capital program beyond closeout of
the original project and on-going maintenance. No additional borrowing for
capital projects is anticipated.
WHAT COULD TRIGGER A RATING ACTION
Underperformance in container related trade volumes at the two area ports may
adversely affect ACTA's credit quality.
Any material change in the credit quality of ACTA's key counterparties,
including the ports of Los Angeles and Long Beach for debt service as well as
BNSF and Union Pacific railroads to cover operating and maintenance expenses,
will likely affect the rating.
Bondholder security includes the pledged revenue stream and all other monies
held by the trustee except for the Maintenance and Operations (M&O) Fund and
the Reserve Account, both of which are for purposes of operating and capital
maintenance of the corridor. Pledged revenues consist primarily of the volume
assessment charges payable by the railroads and debt service shortfall
advances payable by the ports. A Use and Operating Agreement among ACTA, the
ports and the railroads governs the volume assessment of charges.
In fiscal 2012 (ending June 30), 14.1 million twenty-foot equivalent units
(TEUs), 35% of which were subject to a corridor fee, were transferred through
the San Pedro Bay ports. ACTA saw an increase of 15.8% in total TEUs for
fiscal 2011 followed by a 1.5% decrease for fiscal 2012 (in line with a
respective 12.7% increase and 1.9% decrease for the San Pedro Bay ports
overall). Year to date (three months through September) the corridor has
experienced a decrease of 5.1% in TEUs (as compared to a 0.1% increase for the
same period at the San Pedro Bay ports). This indicates a slight softening in
volume recovery, though the revenue impact is minimized by CPI-linked annual
rate increases on corridor traffic. Despite the recovery seen in 2011, volume
setbacks incurred in 2008 and 2009 combined with the corridor's escalating
debt service profile mean that meeting annual debt service obligations remains
a challenge for ACTA.
ACTA applied for a loan from the federal Railroad Rehabilitation & Improvement
Financing (RRIF) Program in March 2010, with the intention of restructuring a
portion of its outstanding debt. A RRIF loan in the amount of $83.7 million
was ultimately approved in 2011, to be used to refund 1999A senior lien bonds.
The $83.7 million in series 2012 bonds were privately sold in June 2012, and
were issued on parity with existing senior debt. Proceeds from the sale were
used on July 24, 2012 to call and refund all 1999A bonds maturing October
2014-2018, and a portion of those maturing October 2019. The transaction
reduced debt service through 2019, and therefore reduces the potential need
for shortfall advance payments during that timeframe.
Both the Los Angeles and Long Beach ports are legally and individually
committed under the operating agreement to cover shortfalls up to 20% of
ACTA's annual debt service payment. A total of $11.8 million in shortfall
advances has been made in 2011 and 2012; rates for loaded containers were also
increased by $1.12/TEU per the agreement, an increase that will remain in
effect until the ports are repaid in full for their shortfall contributions.
No additional advances were requested for 2013, and based on the ports'
projections of TEUs, no additional advances are likely to be needed in the
The backstop provided by the shortfall advance structure improves ACTA's
standalone credit profile by virtue of the ports' superior financial resources
and near-term contractually obligated revenue streams. Approximately 60% of
both ports' operating revenue comes from minimum annual guarantees (MAGs)
payable by tenants regardless of cargo volume. Fitch rates both ports 'AA'
with a Stable Outlook. Both ports have an adequate amount of unrestricted cash
to meet any near-term shortfall payments without having to adjust their rates
or tariffs. However, should there be a material adverse change in overall port
throughput levels, or should either port express an unwillingness to honor its
obligations under the shortfall advance structure, ACTA's credit quality may
ACTA is a public body that administers the Alameda Corridor, a 20-mile
multi-track freight rail system linking the ports of Los Angeles and Long
Beach, the two largest container ports in North America, with the
transcontinental rail lines near downtown Los Angeles. The $2.4 billion
corridor opened in April 2002 and currently handles roughly 35% of all
container throughput through the San Pedro Bay ports. Pursuant to an operating
agreement with the authority, the BNSF and Union Pacific railroads pay monthly
assessments to cover certain costs of maintenance, operations and repair of
the corridor, giving bondholders a gross lien on corridor revenue. The
corridor connects existing railroad lines near the Los Angeles central rail
yards with the San Pedro Bay port facilities.
Additional information is available at 'www.fitchratings.com'. The ratings
above were solicited by, or on behalf of, the issuer, and therefore, Fitch has
been compensated for the provision of the ratings.
Applicable Criteria and Related Research:
-- 'Rating Criteria for Infrastructure and Project Finance' (July 12, 2012).
Applicable Criteria and Related Research:
Rating Criteria for Infrastructure and Project Finance
ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS.
PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK:
HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING
PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND
METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF
CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL,
COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM
THE 'CODE OF CONDUCT' SECTION OF THIS SITE.
Emma W. Griffith, +1-212-908-9124
One State Street Plaza
New York, NY 10004
Seth Lehman, +1-212-908-0755
Chad Lewis, +1-212-908-0886
Elizabeth Fogerty, +1-212-908-0526 (New York)
Press spacebar to pause and continue. Press esc to stop.