Fitch Ratings has affirmed the 'A' rating on Broward County, FL's $20.8 million of outstanding series 2011 A&B port facilities senior refunding bonds. The senior bonds are secured by net revenues from Port Everglades (the port). The rating outlook is negative.
The port also has approximately $464 million in senior lien port facilities revenue bonds series 2019A-C bonds outstanding that are on parity with the rated debt, as well as $18 million in subordinate port facilities revenue refunding bonds series 2019D. The parity bonds and subordinate bonds are not rated by Fitch.
The Negative Outlook reflects the port's higher exposure to coronavirus-related disruptions due to its sizable cruise operations, stemming from the complete stoppage of national cruise operations as directed by the CDC No Sail Order in an effort to control the coronavirus outbreak. Fitch recognizes the diversified nature of the port's revenue streams, with cruise operations making up only approximately a third of revenues in a typical year, but believes the uncertainty of the current cruise environment raises the risk profile with heightened stresses to coverage and leverage metrics.
Favorably, the CDC lifted its No Sail Order on Oct. 30, 2020 and has provided a path to return to cruise operations. Management has additionally implemented significant cost-cutting measures in fiscal 2020 and 2021 that are expected to offset the decline in revenues. However, a prolonged softening of cruise and cargo demand in the recovery phase would weaken the port's financial strength and further rating action may be necessary.
The rating reflects the port's strong revenue streams, which have become increasingly diversified in recent years and include minimum guarantees that partially mitigate operating volatility. The port remains a key gateway for both cargo and cruise due to its strategic location on the Florida east coast; however, it remains exposed to competitive pressures from surrounding ports and faces downside risk from coronavirus-related disruptions. The rating also considers the port's substantial unrestricted cash and reserves, viewed as sufficient to cover debt service payments and support operations in the near term. Under Fitch's rating case scenario, which incorporates coronavirus-related stresses, both leverage and coverage metrics are pressured but currently remain in line with the 'A' category.
The ongoing coronavirus pandemic and related government containment measures worldwide create an uncertain global environment for the cargo and cruise sectors. Material changes in revenue and cost profile are occurring across the cargo and cruise sectors and will continue to evolve as economic activity and government restrictions respond to the ongoing situation. Fitch's ratings are forward-looking in nature; as such, Fitch will monitor developments in the sectors resulting from the pandemic relating to severity and duration and incorporate revised base and rating case qualitative and quantitative inputs based on expectations for future performance and the assessment of key risks.
