Ike's Impact on Local Creditworthiness Minimal

The credit market impact from Ike, the Category 2 hurricane that made landfall Sept. 12 on the southeastern Texas coast, so far is not nearly as severe as the flooding and wind damage suffered in the coastal areas, said Moody’s Investor Services in a special report on the storm’s implications for public debt.

Moody’s said damage from Hurricane Ike had no immediate impact on the creditworthiness of the area and the ratings firm has not taken any rating action for any of the issuers in the area.

Despite damage in that area ranging from minimal to significant, most issuers appear to have begun the recovery process, and there is no immediate impact on the comprehensive creditworthiness of the area.  Of the municipal issuers contacted by us, none report difficulty making debt service payments in full and on time.

Moody’s said that outside of the Port of Galveston and one housing-related issuer, most of the rating firm’s rated non-governmental debt issuers were less severely affected by Hurricane Ike.

Moody’s-rated debt in the three counties most impacted by Ike – Galveston, Brazoria and Chambers — totals $2.9 billion issued by 59 entities. By rating category, the present creditworthiness of the group is above average with over 75% of the debt issued by entities with a rating of A2 or higher.

In addition, the total debt outstanding is dispersed across a significant number of issuers, with the top 10 issuers comprising about 66% of total Moody’s-rated debt.

Based on observation of similar major natural disasters, short-term expenditure pressures are likely for such items as overtime and disaster recovery efforts in spite of anticipated reimbursements from the Federal Emergency Management Agency. In the near- to medium-term future, our outreach efforts will involve assessing issuers’ contingency plans and the strategies they expect to implement moving forward.