Los Angeles to Sell $340 Million in Bonds to Refurbish Container Port
By Elizabeth Campbell
Sept. 2 (Bloomberg) — The Los Angeles Harbor Department, which runs the busiest container port in the U.S., is selling about $340 million of debt, the most since 2009, after the risk of a crippling strike was reduced by a tentative agreement on health-care costs between longshoremen and shippers.
The sale this week will help refinance debt and upgrade facilities at the Port of Los Angeles, according to bond documents.
The provisional health-care deal between the International Longshore and Warehouse Union, representing 20,000 dockworkers, and shippers in the Pacific Maritime Association was announced in a joint statement Aug. 26. Negotiations continue on a new contract covering 29 ports in California, Oregon and Washington.
While the Port of Los Angeles isn’t a party to the talks, the development is welcome, said Karl Pan, chief financial officer of the harbor department.
“Anytime you eliminate any uncertainty that might in some people’s mind create some sort of risk, that’s good,” he said by telephone. “I would hope for those that are concerned about the labor negotiations that this helps them reach a positive conclusion.”
A strike shuttering West Coast ports for 10 days would put 169,000 people out of work and drain the U.S. economy of $2.1 billion a day, according to a June report by the National Association of Manufacturers and the National Retail Federation.
The bond issue will be backed by revenue from the port, which has 43 miles (69 kilometers) of waterfront berthing and 23 terminal facilities. The port gets most of its receipts from tariffs on cargo and the rental of land and buildings, according to the offering.
Proceeds of the sale will help automate container movement and reduce air pollution from ships docked at the port, Pan said. Part of the deal will also refund 2006 bonds and save about $7 million in debt service, according to Soheila Sajadian, the harbor’s debt and treasury director.
The port securities are ranked Aa2, the third-highest investment grade, by Moody’s Investors Service, which cites the port’s importance to the regional and U.S. economy.
Port cargo, measured by a standard for containers known as 20-foot equivalent units, rose to 8.2 million TEUs in the year that ended June 30, or about 5.6 percent higher than in 2013, bond documents show.
The port leads the U.S. in value of cargo shipped, revenue and net income, according to the documents.
“‘We have to make sure our facilities are strong and efficient so that shipping companies will still want to dock their ships here, and cargo owners believe rightfully that coming through the Port of L.A. is advantageous for them,’’ Pan said.
The harbor joins issuers from Houston to Portland, Oregon, offering about $2.3 billion during this holiday-shortened week, compared with about $4.7 billion last week, data compiled by Bloomberg show.
–With assistance from Romy Varghese in Philadelphia and James Nash in Los Angeles.
Copyright 2014 Bloomberg.
Sign up for our newsletter
Be the First
Join the 67,778 members that receive our newsletter.
Have a news tip? Let us know.