Fitch Ratings defines Coronavirus scenarios for North American ports

The coronavirus pandemic is having sizable and wide-ranging effects on the port space, both through disruptions to supply chains emanating from the first rounds of infection in Asia and government-imposed restrictions on individuals, businesses, and corporations alike, according to Fitch Ratings. 

The former directly affects cargo port volumes, while the latter affects both cruise port passengers and the broader consumer demand that drives imports and exports. Economic effects of the coronavirus are expected to generate throughput and passenger declines along with financial stresses well in excess of what Fitch expects under typical recessionary conditions.

 As a result, Fitch is implementing a portfolio-wide review of its 17 standalone port credits in North America, to be completed by the week of March 30. 

In order to understand an issuer's exposure to financial stress and determine if a rating change is necessary, Fitch has designed two scenarios, described below, to serve as a Rating Case and a more severe Sensitivity Case. In identifying the most exposed port credits, Fitch will consider available liquidity, business mix, and counterparty exposure, as well as the quarter-by-quarter implications for throughput, revenues and expenses as ports face severe near-term stresses.

 Fitch has been in active contact with the port management teams for the majority of its portfolio and is in the process of obtaining up-to-date throughput, revenue and liquidity data, along with management's response strategy. These considerations, together with issuers' longer-term ability to meet debt obligations, will inform Fitch's rating action on each credit. These rating actions will take into account qualitative and quantitative characteristics of each individual credit, but Negative Rating Outlook and Watch revisions, in addition to downgrades, are expected. Fitch expects to review the portfolio within the next week.

Meanwhile,U.S. ports are also showing the first signs of distress both from lack of demand and from the virus itself,” says Ethan Buchman, CMO, Freightos.

 “Some terminals in Seattle and the Port of Miami suspended operations temporarily for lack of incoming cargo, and terminals at the Port of Houston also closed briefly due to a worker testing positive for COVID-19,” he said.