As CPA is due for another credit evaluation in three months, in spite of a clean audit by Deloitte & Touche LLC, the board last Friday downplayed an upgrade in its credit rating owing to the recent earthquake, tsunami, and nuclear catastrophe in Japan.
CPA comptroller Derek Sasamoto told the board that external forces, which are out of CPA’s control, could affect the rating, including the Japan catastrophe.
“That will hurt us again this year,” Sasamoto said.
Whenever Fitch evaluates CPA’s credits, Sasamoto said he relays to them the progress CPA has made.
“Despite the fact that CPA is improving financially, unfortunately…from what they look at in terms of the market, our market is still so soft that they are unwilling to upgrade our rating,” he said.
Early this year, in reaffirming the seaport’s BB minus rating and negative outlook, Fitch cited as credit concerns “prolonged economic weakness of the service area due to CNMI’s weak underlying economy.”
It also noted the commonwealth’s dependence on a fragile tourism sector.
It also stated the negative outlook reflects the possibility of a restrained capacity to meet financial commitments should CPA’s business profile and CNMI’s economic environment continue to be unfavorable.
However, Fitch acknowledged among CPA’s credit strengths are “essentiality” of the seaports for import of goods for the CNMI; management focus and effective containment of operating expenses and the ability to adjust rates to mitigate lower revenue tonnage passing through the ports.
Sasamoto, however, said it is not with 100 percent certitude that Fitch will look favorably to the addition of the PFC charges as gross revenues and may not be allowed to be used for debt service to pay the bonds.
In its May board meeting, the CPA board agreed that the seaport has always been in compliance with its bond indenture requirements. As of May, seaport’s bond ratio was at 1.36 and the airport’s at 1.06.
The FAA’s approval of the PFC revenues translates to an improved bond ratio for CPA well above the required 1.25.
CPA issued revenue bonds twice in 1998: 1998 Series A $20,050,000 and 1998 Series $33.775 million tax-exempt revenue bonds.
The first bond, pegged at 6.5 percent interest and payable on March 15 and Sept. 15 each year from Sept. 1998 to 2028, was used to partially refund an outstanding $8.25 million 1987 Series B tax-exempt bonds.
The second revenue bond issued for the seaport at 6.6 percent interest is payable in 30 years.
In 2005, CPA again issued a revenue bond for the seaport for $7.225 million to defray the cost of paving the container yard area.
The CPA board last Friday also approved the change order for the Saipan International Airport Runway Rehabilitation Project.
Change Order No. 4 requires acquiring a type of asphalt that dries faster than what was previously used.
The said change order, CPA Executive Director Edward M. Deleon Guerrero said, was approved by FAA with an increased cost of $135,481.92.
The project contractor is GPPC Inc.
