BP Spill Threat to Texas Economy Looms Over $300 Million Houston Port Bond
Vessels gather at the BP Plc Macondo well site in the Gulf of Mexico. Photographer: Derick E. Hingle/Bloomberg
July 28 (Bloomberg) -- Brian Youngberg, an analyst at Edward Jones in St. Louis, talks with Bloomberg's Susan Li about the outlook for BP Plc. BP appointed U.S.-born Robert Dudley as chief executive officer and pledged to accelerate asset sales to as much as $30 billion after the Gulf of Mexico oil spill led to a record loss. (Source: Bloomberg)
The Port of Houston Authority, whose Gulf Coast facilities are the second-busiest in the U.S. by total tonnage, is selling $300 million in debt as BP Plc’s oil spill threatens the region’s economy.
The worst spill in U.S. history, which closed fishing grounds and beaches, and cut offshore drilling by half, may cost communities on the Gulf of Mexico $22.7 billion in revenue over the next three years, the U.S. Travel Association estimated yesterday. Oil leaked for three months after the April 20 explosion on the Deepwater Horizon rig that killed 11.
The port authority’s bonds, which carry top ratings from Moody’s Investors Service and Standard & Poor’s, are backed “without legal limitation as to rate or amount” by taxes from Harris County, the third most-populous in the U.S., according to a Moody’s report. Those ratings may be threatened if long-term effects from the spill reduce revenue, Moody’s analyst Michelle Smithen said in a phone interview from Dallas.
“That kind of goes for not just the port, but for all of the credits that have volatility or exposure to oil- and gas- related industries and petrochemicals, which we find a lot in the Houston area,” Smithen said.
Today’s offering, which will fund improvements and refinance debt, is the port authority’s largest in two years, according to data compiled by Bloomberg. A January sale offered 10-year bonds yielding 3.51 percent, 43 basis points above top- rated debt at the time, according to data from Municipal Market Advisors, an independent research firm in Concord, Massachusetts. A basis point is 0.01 percentage point.
Harris County
Harris County, with identical ratings, sold comparable general obligations in February yielding 3.13 percent, or 9 basis points above the MMA index.
Yields on top-rated, tax-exempt general obligations that mature in 10 years averaged 2.86 percent yesterday for a fifth consecutive day, the lowest since at least January 2001, according to MMA data. The yields haven’t increased since June 15.
The 50-mile (80-kilometer) Houston Ship Channel connects the port to the Gulf. Houston ranks second to the Port of South Louisiana on the Mississippi River, the largest-tonnage port district in the Western Hemisphere.
The port bonds are likely to sell at yields close to the AAA index, said Regina Shafer, who helps manage $5.2 billion in municipal assets as assistant vice president of fixed income at USAA Investment Management Co. in San Antonio.
“It’s a very good credit,” Shafer said. “July normally has a lot of reinvestment money, which helps demand even more, and we’re seeing a lot of strong demand.”
Following are descriptions of pending sales of municipal debt in the U.S.:
COLUMBUS, OHIO, the capital of the seventh most-populous U.S. state, plans to borrow about $430 million using taxable Build America Bonds and tax-exempt securities today to refund debt and finance capital-improvement projects. The issue carries top ratings from Moody’s and Fitch, and will be marketed by a group led by Stifel Nicolaus & Co. (Updated July 28)
WASHINGTON STATE, home of Seattle and Microsoft Corp., plans to take interest-cost bids on about $839 million in taxable and tax-exempt bonds today. Proceeds will refinance existing debt and fund the state’s escrow and project accounts. The bonds are rated Aa1 by Moody’s and AA+ by S&P and Fitch, all second-highest. (Updated July 28)
MIAMI-DADE COUNTY EXPRESSWAY AUTHORITY, which operates the five major highways in Florida, will sell $350 million in tax- exempt debt as soon as next week to add reserves to the agency’s construction and debt-service funds. The bonds, backed by toll revenue, are rated A3 by Moody’s and A- by Fitch, the fourth- lowest investment grades, and A by S&P, one level higher. Underwriters led by Citigroup will market the securities. (Added July 26)
To contact the reporters on this story: Brendan A. McGrail in New York at bmcgrail@bloomberg.net; Justin Doom in New York at jdoom@bloomberg.net
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