NEW YORK--(BUSINESS WIRE)--Virginia Port Authority's decision to discontinue negotiations with two potential lessors of its ocean terminals may create negative momentum for other large port privatization projects because of the length of the negotiation, the strong brand names of the bidders, and the meaningful pricing that was considered. It would have been the first privatization of a major U.S. port facility. In our view, the privatization of smaller, individual terminals is less likely to be affected.
The authority had received bids from APM Terminals, a group headed by JP Morgan IIF Acquisitions, the port's existing operating unit, and two other firms that dropped out. The process began in 2011, and estimates of the lease payments were in the $3 billion to $4 billion range over 20 years. In 2009, three parties approached the port with bids to operate the port. They were also turned down by the state. The port's board is opting instead to reorganize the port's structure, integrate the operating unit, and cut costs through the elimination of duplicate management positions.
We believe that those contemplating similar large port privatizations will consider this decision and the events surrounding The Dubai Ports World bid for six major U.S. ports in 1996. Both were politically complicated and suggest that future privatizations will be similarly challenging. We would expect the privatization of smaller, individual terminals to continue, as they present smaller political challenges.
We anticipate no rating action as a result of this development. We have always included the port's existing structure as an operator in analysing the Virginia Port Authority's credit.
Additional information is available on www.fitchratings.com.
The above article originally appeared as a post on the Fitch Wire credit market commentary page. The original article, which may include hyperlinks to companies and current ratings, can be accessed at www.fitchratings.com. All opinions expressed are those of Fitch Ratings.
ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.