Oil Spill Could Hurt Port’s Bond Issue

The Port of Houston Authority is on tap to sell a US$300 million bond issue today, but the offering could be impacted by the BP oil spill in the Gulf of Mexico.

The worst spill in U.S. history has already closed fishing grounds and beaches, and cut offshore drilling by half. The U.S. Travel Association estimates the spill may cost coastal communities some US$22 billion in revenue in the next three years. Oil spewed for three months after the April 20 explosion on the Deepwater Horizon rig that killed 11.

The Port of Houston Authority’s bonds carry top ratings from Moody’s Investors Service and Standard & Poor’s. They are backed “without legal limitation as to rate or amount” by taxes from Harris County. But Moody analyst Michelle Smithen says those ratings could be threatened if long-term effects from the spill threaten Harris County revenue.

“That kind of goes for not just the port, but for all of the credits that have volatility or exposure to oil- and gas- related industries and petrochemicals, which we find a lot in the Houston area,” Smithen said.

Today’s offering, which will fund improvements and refinance debt, is the port authority’s largest in two years, according to Bloomberg. Yields on top-rated, tax-exempt general obligations that mature in 10 years have averaged 2.86 percent for the past week, the lowest since at least January 2001, according to MMA data.