Posted September 23, 2019
The final piece to a $1.6 billion spending plan to keep the Charleston waterfront competitive in an era of bigger, heavier ships came together this week with the State Ports Authority’s second bond offering in as many years.
The maritime agency placed $547 million in debt that will help pay for a new terminal in North Charleston and an access road linking the site to Interstate 26. Other proceeds will retire $125 million of higher-interest debt issued in 2015 for a savings of about $11 million.
Interest on the new, 40-year debt obligation — the SPA’s largest single transaction in history — is 3.55 percent.
“That’s outstanding, there’s no other way to say it,” Phil Padgett, the authority’s chief financial officer, said of the low interest rate. Last year, the authority issued $325 million in bonds at 3.92 percent.
“It was a pretty significant decrease in a year’s time,” Padgett said.
The new financing announced at the authority’s board meeting Thursday gives the agency about $1.4 billion worth of outstanding debt backed by revenues from shipping line contracts, cruise line charges and other operations.
It also completes the funding for improvements that began in 2015 and “will set us up for a really bright future” while keeping Charleston among the nation’s top container ports, said Jim Newsome, the authority’s president and CEO.
“I would have told you in 2015 that we were significantly behind on infrastructure,” Newsome said. With the projects that will completed by 2021, he said, “we’ve caught up completely ... and just in the nick of time.”
Winding down infrastructure spending in the next couple of years will give the authority more time to pursue a more diversified mix of cargo, Newsome said, supplementing the port’s manufacturing base with more retail, agricultural and petrochemical products.
The port’s terminals handled a record 1.36 million containers in fiscal 2019, which ended June 30, and set a single-month record of 132,233 boxes in August. The authority expects 2 percent growth this year to 1.385 million containers of all sizes.
Mark Vitner, senior economist at Wells Fargo, said global trade is slowing but spending at the Port of Charleston will pay off especially if the authority can shore up rail access to link the coast with Midwest markets.
“From an interest rate perspective, it’s a great time to borrow money,” Vitner said during a visit to Charleston on Thursday. “I would be investing the money in the port because the thing that seems to be more certain is that we’re going to be seeing more goods coming to East Coast ports.”
Ports along the East Coast now account for roughly one-third of cargo shipped from Asia, helped by an expansion of the Panama Canal that allows bigger ships to reach them more quickly. That’s up from about one-fourth of all Asian cargo five years ago.
Moody’s and Standard & Poor’s reaffirmed their A1 and A-plus ratings, respectively, on the authority’s debt.
Moody’s said its rating “reflects the authority’s strong cargo volumes, benefiting from favorable demographics and industrial trends in the South Carolina and Southeast economies.”
S&P cited the authority’s “very strong management and governance” as well as the region’s sound economy.
More than half of the bond revenue will be used to complete the initial segment of the Leatherman Terminal in North Charleston, which is scheduled to open on the former Navy base in March 2021.
The first phase will include a 1400-foot berth that can handle ships carrying 18,000 cargo containers, five ship-to-shore cranes with 169-foot lift height and 25 rubber-tired gantry cranes that can stack cargo boxes six high and seven wide.
Two future phases of the $762 million Leatherman Terminal will be built as market conditions warrant, giving the port enough capacity to handle cargo through at least 2035.
Another $136 million will be used to pay for the $330 million access road, a joint project between the SPA and the S.C. Department of Transportation that’s designed to minimize port truck traffic off local roads.
Projects funded by previous bonds include crane and equipment purchases and refurbishing Wando Welch Terminal, the port’s largest and busiest facility.
While it’s not a part of the authority’s $1.6 billion spending plan, the agency points to a $558 million project to deepen Charleston Harbor as a key piece of the agency’s infrastructure plan. The state- and federally funded dredging project will be completed in 2021 and allows big container ships visit the port’s terminals at any time regardless of tides.
Reach David Wren at 843-937-5550 or on Twitter at @David_Wren_