The major rating agencies see a wide range of fallout from Hurricane Katrina, with the storm hitting airlines, real estate securitizations and public finance. However, they agree it is still too early to get accurate assessments of the financial damage.

Moody’s Investors Service reports that its public finance group is currently reviewing the impact associated with Hurricane Katrina on the southern U.S. and intends to continue monitoring ongoing developments. “While a natural disaster can result in significant emergency expenditures and a disruption in revenues, the event in and of itself has not resulted in a decline in long-term credit quality in previous instances,” it notes. “Given the region’s reliance on economic activity derived from tourism, the speed by which a recovery occurs will be one of the many important considerations in any future rating actions.”

The rating agency also notes that, after a natural disaster, an influx of funds from the federal government and private insurance pays the cost to repair and rebuild damaged infrastructure, “however, municipal entities may still be faced with short-term cash flow challenges related to economic and fiscal stress.” It adds that not enough information is available yet to assess the ultimate impact and recovery period of the hurricane.

Fitch Ratings suggests the aftermath of Hurricane Katrina on New Orleans and the surrounding Mississippi Gulf Coast area may also adversely affect several commercial mortgage-backed securities transactions. “Making landfall as a category 4 hurricane, Katrina has inflicted severe damage not only to commercial real estate properties, but to the local economy and infrastructure that support them. The effects of this disaster will be felt for sometime,” says Adam Fox, director, Fitch Ratings.

Fitch has identified 18 transactions with greater than 5% property concentration in this area, with concentrations ranging from 5% to as high as 52%. Fitch is also closely monitoring certain individual loans and credit assessed loans within the disaster area. It expects delinquencies in U.S. CMBS to rise, but expects minimal losses as repair costs will ultimately be covered by insurance.

Fitch expects to begin receiving property status reports in the next couple of weeks. “While we have been able to quickly identify properties in the disaster area, contacting borrowers is proving extremely difficult,” Fox says. “The catastrophic extent of damage combined with loss of power, communication problems and subsequent flooding continues to prevent borrowers in many areas from accessing their properties to even assess damage, so it may be some time before the full extent of damage is realized.”

Finally, Standard & Poor’s says Hurricane Katrina will add to the problems facing the already hard-pressed U.S. airline industry.

“The most serious potential effect is higher fuel prices, rather than direct effects on operations,” it notes. “Loss of production from offshore oil rigs has reduced supply and boosted already high oil prices to around US$70 a barrel. In addition, the closure of refineries in the area (representing 10% to 12% of U.S. capacity) is already raising gasoline prices significantly and is having an effect on jet fuel, as well.”

S&P says future prices will be affected by the extent of damage to refineries that produce jet fuel. Most such Gulf Coast refineries are west of New Orleans and were not in the direct path of the hurricane. Prices will also be affected by the disruption of supply pipelines due to loss of electrical power or other causes, and the speed of repairs to facilities.

Direct effects of the storm include added costs to re-deploy aircraft and some loss of revenue from flight cancellations. “In the longer term, if the storm and resulting higher energy prices slow economic growth and consumer spending, it will have an indirect depressing effect on air travel,” says Standard & Poor’s credit analyst Philip Baggaley.