Standard & Poor’s (S&P) Global Ratings has raised its rating on Galveston Wharves revenue bonds from A minus to A for the proposed issuance of up to $160 million in bonds to fund a fourth cruise terminal. The Galveston Wharves operates the Port of Galveston, the fourth most popular cruise port in the U.S.
According to S&P, "The upgrade reflects our view of the increasing revenues from cruise activity and associated parking revenues from investments made at the port, which we expect will sustain improved financial metrics.”
The stable outlook reflects S&P’s view that the port can meet its forecast growth in revenues due to the investments made and will maintain an improved financial risk profile, the report stated.
In addition, Fitch Ratings has upgraded its outlook for port revenue bonds from stable to positive, while holding its A minus rating.
The port is preparing this summer to issue a revenue bond package of up to $160 million to fund construction of the new cruise complex at Pier 16, including a terminal, parking garage and other improvements, as well as bond issuance costs. Co-managers for the financing are Hilltop Securities and Piper Sandler Companies.
As a self-sustaining city entity, the port generates and reinvests revenue from operations, bonds and grants to create economic growth, jobs and other benefits for the Galveston region.
Rodger Rees, Galveston Wharves port director and CEO, said, “This independent evaluation points to a bright future for the port’s cruise business and our plans to reinvest port revenues in infrastructure to grow our cruise, cargo and commercial business sectors. This improved bond rating will allow us to fund the bonds at a lower interest rate, which is always great news.”
Rees added that the improved rating also is indicative of the strength of the port industry globally. S&P Global Ratings is the leading index provider and data source of independent ratings. An S&P rating describes the general creditworthiness of a company, city or country that issues debt.
New Terminal Opening in 2025
Construction has begun to convert an existing cargo warehouse into the 165,000-square-foot cruise terminal. The $96 million cruise terminal project will include marine work on the pier, two passenger boarding bridges and ground transportation areas.
In addition, the port will build a $55 million parking garage servicing approximately 1,700 cars. The estimated $151 million project will be funded with port cash reserves and revenue bonds.
The new cruise terminal will open in November 2025 to homeport the MSC Seascape. The Galveston Wharves and MSC Cruises, a leading international cruise company, finalized an operating agreement for the complex in early 2024.
Under the 20-year agreement, which includes four 5-year extension options, MSC will have a set cruise schedule beginning in late 2025 when the terminal opens. The port also can negotiate with other cruise lines to use the terminal based on availability.
