Moody's Investors Service has downgraded $1.7 billion in bonds for the Alameda Corridor Transportation Authority, which oversees the 20-mile rail route built to speed the flow of cargo from the ports of Los Angeles and Long Beach to retail shelves across the U.S.
Moody's on Wednesday lowered ratings on the senior lien bonds to A3 from A2 and subordinate lien bonds to Baa1 from A3. It also put the ratings on a watch list for possible further downgrades.
Analysts said the downgrade represented the fallout from the deep global recession and what is expected to be a weak recovery late in the year.
"It's a reflection of their weakened financial position resulting from cargo declines on the corridor," said Baye B. Larsen, Moody's public finance group analyst.
If the situation doesn't improve and cargo traffic remains slow, the agency will have to turn to the governing boards of the ports, which are obligated to cover shortfalls of up to 40% in the authority's annual debt payments.
Container fees collected by the authority last month were down 40% compared with January 2009.
The corridor opened in 2002.
In response to the downgrade, authority officials said the agency was not suffering any immediate problems. The officials had reported earlier that they would be able to keep up with payments into late 2010 before needing assistance from the ports. Any assistance would have to be paid back to the ports when cargo traffic recovers.
"The positive indicators that point to container volumes increasing at the ports of Los Angeles and Long Beach will, we believe, lead to an upturn in containers traveling through the Alameda Corridor and long-term growth in . . . revenues," the authority said in a statement.