Our hearts go out to those whose lives were affected by the collapse of the Francis Scott Key Bridge after a major support was struck by a massive container ship in Tuesday’s early morning hours. Video clips of the collapse are captivating but distressing, given that there were people on the bridge. Search and rescue efforts began immediately and as we write this six people are unaccounted for. The human tragedy could have been much worse had the incident occurred at a time when there was more traffic, given the significance of the bridge to commerce and travel in the area. The bridge is a major transportation corridor on I-695 and the major route for cargo to and from the port. The effects of the collapse on the port, the greater Baltimore area, Maryland, and supply chains throughout the country will likely be felt for a long time. The governor declared a state of emergency. The Eastern Seaboard is densely populated and has numerous ports, however dislocation will still be felt.
The importance of ports to local economies include being a gateway to trade, providing employment and job creation, and contributing to supply chain efficiency. As we saw during the pandemic and are seeing currently with the rerouting of ships from the Strait of Hormuz due to attacks on shipping, supply chains can adjust, but that takes time and money.
From a credit perspective, the bridge is one of a number of transportation facilities owned by the Maryland Transportation Authority which is rated Aa2 by Moody’s and AA- by Standard and Poor’s. It has a very strong cash position as well as debt service coverage. We own some of this credit and are comfortable with it.
Here in Florida, the Skyway Bridge in the Tampa area was hit by a freighter and collapsed 44 years ago, resulting in loss of life and disruption to travel and commerce. In Minnesota and Connecticut, bridges collapsed due to design or improper maintenance. More recently, an overpass on I-95 in Philadelphia was destroyed by an oil truck fire. The local, state and federal response to that event allowed the repair of the bridge to happen much faster than would have been the case if the agencies involved hadn’t come together to overcome bureaucracy. We hope and expect for a similar outcome with the Francis Scott Key Bridge.
There is often a declaration of a state of emergency in response to a severe weather event, but the disruption to commerce from this bridge shutdown in a densely populated area may well have as great an economic impact. Hurricanes Sandy and Katrina come to mind.
As with other disasters, we will evaluate the effects of credit-quality changes as well as the federal, state, and local response on our holdings and other affected municipalities.
Patricia Healy, CFA
Senior Vice President of Research & Portfolio Manager
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