Fitch Gives Virgin Islands Bonds Negative Outlook; Deems Continued Borrowing As Unsustainable Path
ST. CROIX — U.S. ratings firm Fitch has affirmed its USVI issuer default rating (I.D.R.) (the territory’s general credit rating) at B+ and the ratings on multiple gross receipt tax and rum cover-over (matching fund) bonds — a combined total of $2.1 billion — at BB, which is essentially junk status. Fitch also gave the territory’s bonds a negative outlook.
The action comes on the heels of the Senate’s approval of a $247 million debt financing measure, $147 million of which is to be used for government operations. The bill was signed into law by Governor Kenneth Mapp on November 7 at a Public Finance Authority meeting, where swift action was taken by the P.F.A. in authorizing the borrowing — which is expected to be secured by December 15.
The negative outlook was given after the territory was advised by bondholders that it would need to place a lien on its bonds before it could receive borrowing at rates that are not low, but not extremely high. The Senate did as it was told and made the lien retroactive, meaning all current and future bonds will include the lien that forces the government of the Virgin Islands to forego its financial obligations — even essential ones — until its debtors are paid.
Essentially, the U.S. Virgin Islands has been noosed to its debtors, and peradventure the territory were to suffer financial calamity — which has been projected by Fitch and other firms if Virgin Islands leaders fail to find viable solutions for balancing its budget compared to the annual borrowing of hundreds of millions of dollars — because of the lien, the territory would suffer even more financial damage, as it would not be allowed to financially service its own needs before paying its debtors. And reneging on the lien agreement to meet essential needs would permanently damage the territory’s borrowing standing.
Read more: http://viconsortium.com/business/fitch-gives-usvi-bonds-negative-outlook-deems-continued-borrowing-as-unsustainable-path/
