Port of Oakland bond ratings up as it invests in infrastructure

It's all been good news for the Port of Oakland, as Moody’s Investors Service has upgraded its bond ratings and assigned ratings on an upcoming series of refunding revenue bonds.  The upgrades, announced June 9, include:

$656 million of senior lien bonds to A1 from A2;
$324 million of intermediate lien bonds to A2 from A3; and
a subordinate lien bank note rating to A3 from Baa1.

Moody’s assigned an A2 rating on four series of intermediate lien refunding revenue bonds expected to be sold June 21.  The Port said proceeds from the sale would be used to refund the Port's 2007 intermediate lien bonds.

Moody’s said the port’s outlook is stable. 

“The stable outlook reflects our expectation of stability in air passenger traffic and marine cargo volume; ongoing vitality in the regional economy; and manageable risk in the maritime division due to the landlord model employed, which will support financial stability through a period of operational transition and potential short term revenue volatility,” Moody’s said in an announcement.

Moody’s said the upgrades reflect significant improvement in the Port’s credit profile, driven by a long-term and ongoing deleveraging; strengthened activity levels, improved debt service coverage ratios and a materially improved cash position. 

More inbound

Meanwhile the port's containerized import volume reached a two-year high in May. The port said it handled the equivalent of 82,440 20-foot import containers, up 1.4 percent from May 2016. It was the highest volume since August 2015 when the Port handled the equivalent of 82,492 20-foot import boxes.

Imports account for 48 percent of containers shipped through Oakland. “Our import volume has been up four consecutive months,” said Port of Oakland Maritime Director John Driscoll. “That’s encouraging as we head into the traditionally busy summer-fall peak season.”

The port said overall volume – imports, exports and empty containers – grew 2.2 percent during the first five months in 2017 compared to the same period last year. Meanwhile the number of vessels visiting Oakland was down 7 percent. Despite the fewer vessels, container volumes are growing due to the larger ships that visit Oakland, the port said. For example, megaships capable of transporting up to 14,000 20-foot containers come to Oakland weekly now.

Brendan R. McCahill, the Senior Vice President of Trade Data Content at Descartes Datamyne, said the calling of these mega-vessels are a "game changer" for many ports on both the East and West Coast. 

In the research firm's latest rankings, Oakland finished 9th.  

Balanced moves

Port of Oakland Executive Director Chris Lytle says that he wants more rail business here. He told a meeting of railroad executives in San Francisco late last month that the port is poised to make it happen.

“We have two outstanding partners at the Port in the Union Pacific and Burlington Northern Santa Fe railroads,” Lytle told the annual meeting of the North American Rail Shippers Association. “And everyone in Oakland would like to see more cargo move in and out of the city on the rails than over the road.”

Oakland’s Executive Director briefed more than 270 industry leaders and cargo owners on the state of West Coast Ports. He said Oakland is building momentum following a record year for loaded container volume in 2016.  He added, however, that there’s plenty of room to grow on the rails.

Ports rely on railroads or trucks to transport ocean shipments to-and-from the docks. Mr. Lytle said both major West Coast railroads operate at far less than capacity in Oakland. The reason: the Port’s primary market for containerized cargo is Northern California – more efficiently served by trucks than trains. But he added that Oakland’s rail profile could improve soon thanks to recent investments at the Port.

Late last year the ort completed a $100 million rail storage yard with 41,000 feet of tracks. The facility, within sight of Oakland marine terminals, should be ideally located for export shippers, Lytle said. He envisioned 100-car grain trains rolling into Oakland, then transferring cargo to containers for ocean transport.

In mid-2018, Cool Port Oakland will open, Lytle said. The 300,000-square-foot refrigerated facility will be the pivot point for exporting beef, pork and chicken to Asia. Those shipments will likely come from the Midwest in rail cars, then go into ocean containers at Cool Port Oakland. Lytle said the facility would be able to handle 36 refrigerated rail cars at one time. 

Developments next door to the port could generate even more rail traffic, the Executive Director said.  They’re going up on city-owned land that was formerly part of the Oakland Army Base. They could attract cargo shipped in bulk – not a staple at the Port, but a likely candidate for the Port’s rail yard.

Lytle said rail transport is the preferred means of shipping cargo in and out of the Port. It takes trucks off the road, he said, reducing freeway congestion and diesel emissions.