Fitch affirms Miami-Dade County’s seaport senior revenue bonds at A

Fitch Ratings affirmed the A rating on Miami-Dade County, Florida’s $1.8 billion of senior lien seaport revenue bonds issued for the county’s seaport department, PortMiami.

The rating outlook is stable. The senior lien bonds are secured by a first-lien pledge of seaport net revenues.

Fitch has also rated the $442.5 million of the county’s Series 2021B seaport revenue bonds AA-minus/stable. These bonds are secured by a subordinate lien on seaport net revenues and a county covenant to replenish deficiencies in the debt service reserve fund (DSRF).

“The rating reflects PortMiami’s fundamental operating strengths, including its global leading cruise port market position and its role as one of the largest ports in the state of Florida in terms of cargo volume,” Fitch said.

“The rating is further supported by the port’s substantial, long-term contractual minimum annual guarantees with both cruise and cargo operators, which have historically helped to insulate port revenues from volume and passenger volatility and are expected to rise measurably based on contracts in place,” according to Fitch.

PortMiami’s unrestricted funds remain substantial and provide for a strong level of liquidity to cover all port costs, the rating agency said.

“Still, the port’s overall leverage metrics are expected to remain elevated under the Fitch rating case due to the substantial capital improvement plan (CIP) that calls for sizable borrowings in the near- to medium-term but ultimately reach a level of stabilization in line with the ‘A’ category following the completion of major capital projects,” Fitch said.

The port’s current CIP totals roughly $2.2 billion through fiscal 2033. Major ongoing projects include cargo yard related improvements and the construction of additional cruise terminals. The CIP also includes a new campus and redeveloped cruise terminal for Royal Caribbean Group.

Fitch said it expects the CIP funding to come from future borrowing, grants, customer investment and existing funds.

In 2022, Fitch revised the outlook on PortMiami’s senior lien seaport revenue bonds to stable from negative.

Fitch said at the time the outlook revision “reflects the port’s increased operating stability highlighted by the full resumption of cruise activity as well as continued robust revenue performance from cargo operations, which together with the demonstrated prudent financial and debt management through pandemic-related disruptions, should enable PortMiami to maintain stable metrics under Fitch’s rating case.”

In 2021, the county’s Seaport Department won The Bond Buyer’s 20th annual Deal of the Year award for PortMiami’s $1.24 billion seaport revenue refunding bonds.

In a separate action on March 5, Fitch raised Orlando’s $159.87 million of Series 2017A senior tourist development tax (TDT) revenue bonds, 6th-cent contract payments, to A from BBB. The outlook is stable.

“The upgrade to A reflects expectations for continued solid growth in the pledged revenues and improved resilience given the early payoff of a series of subordinated bonds that had a provision for accession to parity status with the rated bonds in the event that certain coverage requirements were met,” Fitch said.

Given the accession provision, Fitch said its analysis “focused on all-in debt service, which was materially reduced following payoff of the Series 2008C bonds.”

“In addition, no additional issuance is permitted under the indenture except for refunding purposes,” Fitch said. “The rating also reflects the concentrated nature of tourism-related taxes, which are vulnerable to unpredictable shifts that weigh asymmetrically on the credit profile.”

The Series 2017A TDTs are a limited obligation of the city. They are backed by a senior lien on 50% of the 6th-cent TDT, which is a one-cent tax on hotel room charges levied throughout Orange County and sent by the county to the city under a legal agreement.

The county has agreed to deposit the revenues with the bond trustee on a monthly basis until the earlier of the date the bonds are defeased and paid in full or Nov. 15, 2038, after the final maturity of Nov. 1, 2038.

The bonds are also backed by cash-funded reserves with an aggregate funding requirement equal to 100% of maximum annual debt service (MADS).

The Orlando tourism market has shown it can quickly bounce back from severe events, such as the COVID pandemic, and has shown solid long-term growth characteristics, with TDT revenues rising at a compound annual growth rate of 5.1% through fiscal 2022, Fitch said.

Orlando’s economy remains strongly linked to the leisure and hospitality sector, Fitch noted.

“Disney (IDR at A-minus/stable) and Universal Orlando, which is owned by Comcast (IDR at A-minus/stable), are among the region’s largest employers and both continue to invest in their respective theme park and hotel inventory,” Fitch said.

While tourism is the main industry sector, Fitch noted, there are other areas that are developing, including technology, health care and advanced manufacturing. Since 2010, the city’s population has risen 33% to about 316,000.