Ports & Terminals

PortSL, T. Parker Host Agree To Lower Price For Avondale

After first unveiling plans in January to purchase the former Avondale Shipyard on the west bank of the Mississippi River in Jefferson Parish from T. Parker Host (Host), the Port of South Louisiana (PortSL) has announced that the port and Host have agreed to a final purchase price for the property, which is now branded as Avondale Global Gateway (AGG).

Port officials made the announcement minutes after PortSL’s board of commissioners unanimously endorsed the amended purchase agreement during its August 30 meeting.

According to the purchase agreement, PortSL, which officially oversees port activities along 54 miles of the Mississippi River in St. Charles, St. James and St. John the Baptist parishes, intends to purchase the terminal for $330 million, with $280 million coming from revenue-backed bonds and Host loaning the remaining $50 million to the port.

The original proposed purchase price was $445 million. A report for PortSL from John C. Martin & Associates actually valued the property at between $239.2 million and $327.9 million.

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According to the purchase agreement, Host would remain as the terminal manager and stevedore for the terminal, although those terms have yet to be finalized.

“Avondale Global Gateway represents a transformational opportunity for the Port of South Louisiana and this entire region,” PortSL CEO Paul Matthews said in a statement. “We are experiencing dynamic shifts in global trade and logistics, and the acquisition of Avondale Global Gateway—while maintaining terminal management from Host—presents an opportunity for PortSL to reinforce its position as a leading hub for commerce, not just in Louisiana, but along the entire Gulf Coast and around the world.

“A project of this magnitude was always going to take time,” Matthews added. “We have done our due diligence, looked at this project from every angle and have worked to ensure the state of Louisiana gets the best deal possible. I am excited that we are nearing the end of this process and am looking forward to a bright future as we continue the efforts of Host in restoring AGG to its former glory.”

Addressing port commissioners, Jason Akers, managing partner at Foley & Judell and bond counsel for the port, described how the port and Host arrived at the new purchase price and how port officials believe they can not only service the debt for purchasing the terminal but also pay for capital expenditures needed at the facility solely through revenue generated at Avondale. That 30-year plan hinges on projected revenues at the terminal, beginning with a projected net revenue of $14.7 million in 2024, which largely reflects Host’s estimates for this year.

“These are all projections going forward, but they’re projections that are provided to us by experts in their field and known to be able to do this,” Akers said.

According to the port’s projections, the terminal could eclipse $20 million in net revenue by 2028, or year five of ownership. Net revenue is projected to be near $27.5 million by 2033. Over that same period of time, capital investments needed at the facility are estimated to cost more than $73.5 million. Port officials expect much of those funds to come from grants or other outside funding.

Akers said revenue projections anticipate the terminal achieving “stabilization,” or making money after expenses and debt payments, around 2034. The port intends to structure its debt to reflect that, with revenue bond payments being interest-only for about the first decade. The estimated total principal amount over the course of 30 years is about $360 million.

For the $50 million loan from Host to cover the remainder of the $330 million purchase price, payments will be made solely from available cash, or funds remaining after operations and maintenance costs and principal, interest and other required deposits are paid. Once the terminal is cash positive, 80 percent of available cash would go toward repaying Host, with the remaining 20 percent going to the port.

According to Akers’ presentation, the port would actually begin paying down that loan in 2034. Using the port’s projected revenues, that subordinate note from Host would be paid in full in 2037, with a total of $92 million going to Host over those years for principal and interest.

Port commissioners posed few questions during Akers’ presentation, but with revenue projections largely based on the growth of tenant revenues, one commissioner asked how many tenants are currently at Avondale.

“There are ways to answer that question,” Akers said, “and I will note that there are three leases that are currently in existence. There are a number of [letters of intent] of potential tenants in the future.”

Akers said the three leases in place are within the terminal’s marine industrial business line, which is primed for growth.

“Those three leases really are, I would say, in their infancy as far as future operations,” he said.

Another commissioner asked, if the terminal missed its revenue projections and therefore could not independently service its debt, would the Port of South Louisiana’s other sources of income come into play. Akers replied in the negative.

“These payments for this debt service are designed to be made solely from revenues of the Avondale facility,” Akers said. “They’re not to be made from Port of South Louisiana’s other revenues. Only Avondale. You would have the opportunity, should you so desire in the future, to put other port revenues in their place, but it’s not a demand. It’s an opportunity.”

Akers admitted that, with terminal operations not anticipated to stabilize for close to a decade, the task is daunting.

“It’s a long way,” he said. “We get it, but this is what happens when you buy a young facility. It takes it a while to be at its operational peak.”

In the end, Akers and Matthews convinced commissioners of the merits of the plan. Commissioners also approved a resolution for Moody’s Investors Services to issue a credit rating for the revenue bonds for the terminal purchase.

Within a week, the port will make its case to the State Bond Commission. If that takes place, the commission could approve the financing at its September 21 meeting. Following that, a bond sale could take place in November, with the port closing on the property in December.

“In 2018, we had a vision for completely redefining Avondale Shipyards to create Avondale Global Gateway,” Host Chairman and CEO Adam Anderson said in a statement. “Since then, we have turned a derelict site into a profitable center of commerce, created hundreds of jobs, and secured tenants in our core industries of renewable energy, construction materials and sustainable food products. In partnership with the Port of South Louisiana, we are committed to reaching Avondale Global Gateway’s full potential and bringing even more sustainable business to the West Bank.”