Correction: Fitch Rts $113.4MM Long Beach, CA Harbor Rfdg Revs 2004 'AA'; Outlook Stable.

Business Editors

SAN FRANCISCO--(BUSINESS WIRE)--March 4, 2004

(Correction: In a press release issued 2/03 the harbor revenue refunding bonds par amount should be $81.4 million, series 2004A (AMT) and $32 million series 2004B (Non-AMT). Please see amended release.)

Fitch Ratings assigns a 'AA' rating to $113.4 million City of Long Beach, CA harbor refunding revenue bonds, consisting of:

-- $81.4 million, series 2004A (Non-AMT), and

-- $32 million, series 2004B (AMT).

The Rating Outlook is Stable. The bonds are scheduled for negotiated sale via a syndicate led by Citigroup during the week of Feb. 16, 2004. The proceeds will be used to refund the harbor revenue bonds, series 1993. The final maturity date is 2018. Fitch Ratings also affirms the 'AA' rating on $1.78 billion of outstanding City of Long Beach (port), harbor refunding revenue bonds. The Rating Outlook remains Stable. All bonds are secured by a pledge of the port's gross revenues.

The 'AA' rating reflects the port's various credit strengths including its strategic West Coast position, breadth of facilities and intermodal connections, strong financial performance, and experienced management. The Port of Long Beach, a harbor complex, was the number two ranked container port in the nation in terms of cargo volume, handling 4.3 million 20-foot equivalent units (TEUs) in fiscal 2003.

Located in San Pedro Bay on the Southern California coast, the Port is geographically situated to serve an essential role in Pacific Rim trade. Southern California is the largest primary market in the nation and consumes a substantial portion of the goods traveling through the ports. The port has 64 miles of rail track serving all major marine facilities. Thus, cargo is efficiently transferred from the port to a system of highways and railways, including the newest link in container transportation, the Alameda Corridor Transportation Authority's rail corridor, for destinations throughout the state and U.S.

The stable outlook reflects strong operating revenues, debt service coverage and proactive management. Operating revenues are generated through long-term lease agreements with cargo operators; therefore, approximately 90% of the port's operating revenues are fixed, fostering long-term stability for the credit. Strong financial performance in fiscal 2003 was reflected in net revenues of approximately $218 million and debt service coverage of 2.57 times(x).

Forecast projections estimate net revenues at roughly $279 million in fiscal 2007 with debt service coverage at a healthy 2.94x and no additional debt is anticipated through 2007. The port raised the current tariff rates by 5% in January 2004. Finally the capital improvement program (CIP) is tailored to improve capacity and transportation connectivity, which is essential to remaining competitive with other West Coast ports. Experienced proactive management has positioned the port well so that it can meet the needs of cargo operators as they continue expanding their operations while the shipping industry further consolidates.

While the port's lease rental revenues remain concentrated among a few tenants, the port has witnessed recent changes in its tenant profile. The port's 19 largest customers accounted for 90% of its operating revenues in fiscal 2003 with the five largest customers accounting for 60%. Hanjin Shipping Co. moved into the newly completed first phase of the Pier T facility opening the first mega terminal at the port. After Maersk Sealand's (Maersk) departure in fiscal 2003, the port gained two new tenants: Mediterranean Shipping Co. and Matson Navigation Co. In addition, International Transportation Service, Inc. and Pacific Maritime Services Inc. expanded their operations to the piers (G and J) Maersk vacated. To date the financial impact of Maersk's departure has been minimal.

Additional credit factors center primarily on the highly competitive port environment among West Coast ports, issues of trading partner concentration since Pacific Rim trade accounts for the vast majority of all goods transferred through the port and a high concentration of inbound cargo. Although the Port of Long Beach has many advantages over some of its competitors, the Port of Los Angeles remains a viable alternative and, to a lesser extent, the Ports of Oakland, Seattle, Tacoma, and Vancouver. Since the majority of trading countries are Pacific Rim nations, downward economic cycles in Asia are bound to affect the port and possibly result in revenue losses. Lastly, the port's container trade is heavily concentrated in inbound cargo. Imports as a percentage of total cargo were 77.7% in fiscal 2003. Likewise, fluctuations in inbound cargo could result in revenue losses.