Date: June 2019
Location: Los Angeles, California
Financing Amount: $150 million
Financing Type: Revolving line of credit
One of the world’s busiest ports — and North America’s largest container port — needed fresh financing to support improvements to infrastructure and keep pace with growing demand.
The Port of Los Angeles is the largest on the West Coast of the United States with 43 miles of waterfront berthing and 23 terminal facilities. It is equipped to accommodate today’s larger vessels and continues to maintain and improve its strong infrastructure and intermodal capabilities. The Los Angeles area is a major destination for waterborne goods and an attractive point of origin for eastbound shipments.
In 2018, the Port sought out interim funding solutions to support cash flow needs related to its ongoing capital improvement program.
The high-profile prospect and its financial advisors sent a request for proposal (RFP) to a number of financial institutions seeking interim funding solutions to support $600 million in capital projects over the next five years. Previously, the Port had utilized commercial paper supported by a letter of credit for short-term capital funding. The RFP sought terms for a replacement letter of credit or alternative line of credit solutions. A competitive fee was a priority.
The Port was aware of PNC’s Public Finance group’s efforts with the City of Los Angeles, including a relationship with Los Angeles International Airport, and included the bank in RFPs in October 2018. The RFP from the Port comprised up to $150 million for either a standby line of credit to support commercial paper or a revolving credit facility.
The Port did not anticipate the need to utilize the interim facility but wanted liquidity in the event that circumstances changed. After reviewing the Port’s needs, PNC determined that a revolving line of credit solution could be structured to provide the Port with a degree of flexibility that could compete with commercial paper, including multiple interest rate index tenors and tax statuses, at a lower borrowing cost. Unused facilities fees for a line of credit are typically lower than commercial paper liquidity facility commitment fees, benefitting a revolving credit facility structure when utilization is low.
PNC’s deal team responded with three, four and five-year options for a $150 million standby line of credit to support commercial paper as well as a three-year option for a $150 million revolving credit facility.
The borrower elected to move forward with PNC’s three-year revolving credit facility.
In discussing the Port’s relationship with PNC, Marla Bleavins, Deputy Executive Director and Chief Financial Officer for the Port of Los Angeles, said, “We appreciated the competitive nature of PNC’s fee proposal and their creativity around structuring a solution tailored to our needs. We are excited about this new partnership.”