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You've heard of Miami Vice, but how about a Miami slice...of the city's port debt.
On Tuesday, Miami-Dade County announced the sale of $1.4 billion in bonds backed by revenue from the Port Of Miami. The offering is designed to entice investors seeking local government debt linked with industries tightly anchored to the U.S. economic recovery, like cargo and cruises.
Easy Come, Easy Cargo
While the pop culture mythology surrounding Florida's largest port — from 2 Fast 2 Furious to Cocaine Cowboys — skews toward the illicit, the real story is about legitimate business. Some $45 billion in cargo was processed at the colloquially known "PortMiami" in the 2020 fiscal year, and in non-pandemic times, the port welcomes over 20% of the world's cruise ship traffic.
Fundamentals like that are why investors see a boatload of long-term appeal:
- Cargo revenues at the port climbed more than 20% to $29 million last year. And scorching demand for goods during the pandemic has put the port's cargo volume on track to hit a record 1.25 million 20-foot-equivalent units this year (think of each unit as a large shipping container).
- While cruise revenues sank 35% to $34 million between fiscal years 2019 and 2020, the federal government chipped in $66 million to tide the industry over as it recovers. And Moody's raised the Port of Miami's credit outlook to stable recently, citing expectations that passenger volumes are due for a revival.
"The market is pretty receptive to giving some relief as long as there's a faith things will return to normal," Howard Cure of Evercore Wealth Management told The Wall Street Journal. As for its new bond sale, the Port of Miami plans to put the proceeds toward refinancing its $1.6 billion in outstanding debt.
Don't Short Ports: Bonds backed by ports have been a prudent investment this year: the S&P municipal-bond port index has returned over 2.4% to investors, outshining the 1.9% return on municipal bonds and demolishing the measly 0.2% return on investment-grade U.S. corporate bonds.