Department of Transportation

Improved Bond Rating is Fourth Upgrade in Fourteen Months 

HONOLULU – Moody’s Investors Service (“Moody’s”) has upgraded the Hawaii Department of Transportation Harbors Division’s (“Harbors Division”) revenue bonds Series 2010 A and 2010 B rating to ‘A1’ from ‘A2’; outlook stable.

“The recent bond rating upgrade by Moody’s is great news and underscores the strong management and fiscal policies that continue to be the benchmark of my administration,” stated Gov. David Ige. “I’m proud to say that this is the fourth revenue bond rating upgrade the HDOT Harbors Division has received over the past fourteen months.”

According to Moody’s, “the Hawaii harbor system credit profile is based on the port system’s near monopoly position providing port services for seaborne cargo and cruise passengers in the state; solid actual and projected debt service coverage ratios (DSCRs); recent multi-year tariff increases that have improved operating margins, DSCRs and liquidity, and recent stability in cargo and cruise passenger levels.” Moody’s acknowledged tariff increases over the past several years reflected “a strong management focus on financial performance and have led to substantial improvement in operating ratio and an increase in liquidity, providing financial flexibility to manage operational and financial challenges.”

“By adopting a cash-first, borrow-as-needed method of financing, Harbors has been able to employ its unrestricted cash reserves to underwrite the costs of its Capital Improvement Program (“CIP”) projects and to re-deploy those resources typically associated with debt service payments for bonds issued, to fund CIP projects,” stated Department of Transportation Director Jade Butay. “As an example, using a hypothetical bond issuance of approximately $250 million, Harbors would transform that estimated debt service of $17 million a year over the term of the debt (typically 30 years) to be invested directly into Harbors CIP projects.”

“As a result of solid fiscal planning and management, we’ve been able to secure the necessary resources to undertake important construction projects like the $448 million Kapalama Container Terminal project – the largest capital improvement project in the history of Hawaii’s commercial harbor system – to support Hawaii’s continued economic growth and facilitate the efficient delivery of goods to Hawaii’s communities,” stated Gov. David Ige. “I would like to congratulate Hawaii Department of Transportation Director Jade Butay, Harbors Deputy Darrell Young and their team for a job well done!”

We expect the growing Hawaiian economy will continue to drive demand for goods shipped through the harbor system, notwithstanding the recent imposition of federal tariffs on certain imports. The harbor system may need to issue debt in the near to intermediate term future to fund its future CIP projects, as that need arises. The incremental effects of this debt on DSCRs and leverage metrics should be mitigated by cargo volume growth, revenue growth from planned tariff increases, and the system’s substantial liquidity position.

“Our Harbors team has done an excellent job in setting priorities and implementing successful strategies to upgrade and improve our commercial harbor facilities throughout the state. And they’ve accomplished this without the use of any State general funds; generating their own revenue through user fees and tariffs,” stated Hawaii Department of Transportation Director Jade Butay.

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