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Rating Action:

Moody's upgrades Port of Beaumont Nav Dist, TX to A2 from A3; outlook stable

07 Aug 2019

New York, August 07, 2019 -- Moody's Investors Service has upgraded the Port of Beaumont Navigation District, TX's outstanding revenue bond debt totaling $16.4 million to A2 from A3. The outlook is stable.

RATINGS RATIONALE

Port of Beaumont Nav Dist, TX's upgrade to A2 from A3 is based on the port's sustained increase in operating revenues and debt service coverage levels, which have grown due to the revenue stream provided by Jefferson Energy Companies since 2015. The A2 rating considers the port's continued success as the busiest military cargo port in the nation, aided by the port's connectivity to waterways, major highways and rail. The rating also incorporates the ability of the port to levy a tax to contribute to O&M expenses, which covered approximately 26% of the port's fiscal 2018 cash operating expenses. The port also benefits from minimum annual guarantees (MAGS), which contributed approximately 31% of fiscal 2018 operating revenues. The existence of both MAGS and the O&M tax levy helps to protect the port against both revenue and cargo volatility, which remain a challenge for the port. Finally, the port is not likely to take on additional leverage in the future as it plans to fund all of its capital expenditures through internally generated funds, grants, and private partnerships with current port clients.

RATING OUTLOOK

The stable outlook is based on Moody's expectation that operating revenue, along with flexibility to adjust the O&M tax levy as needed, will continue to provide strong coverage of debt service, as annual debt requirements are relatively low and level around $1.6 million until 2034. Furthermore, the port's flexible capital expansion plan is funded mainly by a combination of grants, public-private partnerships and GO-debt, in addition to being demand driven, which allows the port to delay spending if demand weakens.

FACTORS THAT COULD LEAD TO AN UPGRADE

- Significant increase in revenue generation given the port's relatively small scale within the Moody's-rated US port universe

- MAGS as a percentage of operating revenue above 60% on a sustained basis

FACTORS THAT COULD LEAD TO A DOWNGRADE

- Reduced revenues or increased expenses, leading to lower debt service coverage margins below 2.0x

- Sustained shift away from the fairly stable revenue provided by the Department of Defense throughput

- Cash to debt ratio below 30%

LEGAL SECURITY

The revenue bonds are fixed rate bonds secured by the gross revenues of the Port of Beaumont. The revenue bonds are supported by a debt service reserve which is funded with cash to the port's average annual debt service requirements. Additionally, the bonds are supported by a 1.25 times rate covenant.

PROFILE

The 51st Texas Legislature created the Port of Beaumont Navigation District in 1949 as a governmental entity of the State of Texas. In the 1960s, the port reached its current depth of 40 feet. The port is located about 18 miles up the Neches River at the terminus of the federally maintained Sabine-Neches Waterway and 43 miles by deep water channel from the Gulf of Mexico. It is approximately 270 miles west of New Orleans and 84 miles east of the Galveston-Houston Area. Ocean vessels approach the Port of Beaumont via the Port Arthur Canal and the Sabine-Neches Canal to the entrance of the Neches River.

The port handles many types of general, project, military, and bulk cargos. The bulk cargoes currently handled by the port include grain, construction aggregates and crude oil. The port is serviced by 3 major railroads: Burlington Northern Santa Fe, connecting the port with the areas mostly west of the Mississippi River, Kansas City Southern which links the port with the Midwest and Mexico, and Union Pacific that offers rail links through the Mississippi Valley, Great Plains and the western US. The port is an operator port.

METHODOLOGY

The principal methodology used in this rating was Publicly Managed Ports Methodology published in June 2019. Please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.

REGULATORY DISCLOSURES

For ratings issued on a program, series, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.

Thomas Brigandi
Lead Analyst
Project Finance
Moody's Investors Service, Inc.
7 World Trade Center
250 Greenwich Street
New York 10007
US
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

Kurt Krummenacker
Additional Contact
Project Finance
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

No Related Data.
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