S&P: Halifax Port Authority 'A+' Rating Affirmed On Strong Financial Performance; Outlook Stable
"The rating reflects our view of the HPA's stand-alone credit profile at 'a-', on what we view as healthy operating and financial performance," said S&P Global Ratings credit analyst Dina Shillis. The ratings also reflect our opinion of a moderately high likelihood that the federal government would provide extraordinary support in the event of financial distress, which results in a two-notch uplift to the rating.
The port is Canada's fourth-busiest container after Vancouver; Montreal; and Prince Rupert, B. C. The HPA's natural advantage of ice-free harbor result in it being one of only two ports on the east coast able to attract and service the larger postpanamax and super-postpanamax vessels. Its strategic location on the east coast of North America, with its natural deep harbor and supporting infrastructure, give it a competitive advantage as a first-in and last-out port for Southeast Asia container traffic traveling through the Suez Canal.
The stable outlook reflects our view of the port's prudent financial management to date and our expectation that it will not issue significantly more debt in the next two years than it assumes in its current capital plan. We also expect that the authority will continue to record moderate cargo and revenue growth in the two-year outlook horizon and that it will continue to produce strong annual debt service coverage ratios (DSCRs), including principal and interest, averaging 4x amid expected growth in debt.
Although unlikely in the next two years, if the government increases the strength or durability of its relationship with its port authorities through revised regulation that leads to significantly more oversight, we could revise the link between the federal government and HPA to strong, leading to an upgrade.
Conversely, although we also believe it is unlikely, we could take a negative rating action if significant deterioration in financial performance and higher-than-expected growth in debt led to a material and sustained narrowing in its DSCR to less than 2.0x (or less than 5.0x interest-only DSCR).