There is a long line of ships anchored in Seattle’s Elliott Bay. Container, bulk and RoRo (roll on – roll off) vessels are waiting to unload or pick-up goods at the Port of Seattle. The backup is extending far into Washington’s hinterland. For example, in Washington’s Yakima Valley, agricultural exporters are piling apples into small mountains (see picture) because they are unable to ship their product overseas. This is happening as a result of a longshoremen slowdown at west coast ports. We like port credits because of their typically strong balance sheets and sticky business model. Though the current labor dispute is unlikely to impact any of our credits, there is a tectonic shift coming to U.S. ports. The soon-to-be completed Panama Canal expansion will allow post-Panamax vessels to navigate the locks. These super-sized vessels will change the route by which goods enter and exit North America. There will be winners and losers in the post-Panamax world. Benefiting most will be east coast ports, as their proximity to large population centers is attractive to shippers. The losers will be west coast ports. The Ports of Long Beach and L.A. should see little impact because of their size and competitive position. However, any excess capacity at Long Beach and L.A. will siphon business from northern competitors such as the Port of Oakland and Port of Seattle. The wildcard in the port sector is the Port of Miami. With the largest cruise line terminal business in the U.S., it is positioning itself as a hub in the post-Panamax world. In anticipation, the Port of Miami has been on a debt binge – dredging deeper shipping lanes and expanding capacity. Supporting the current high debt load is the cruise line business. The cruise industry is an economically sensitive sector, and the Port of Miami’s reliance on a volatile revenue source to pay outstanding debt is a credit concern. As always, we are vigilantly minimizing our exposure to rotten credit apples.