Fitch Downgrades Virgin Islands Issuer Default Rating And Dedicated Tax Bonds
The outlook of the U.S. Virgin Islands future continues to dim as ratings firm after ratings firm continue to downgrade the territory’s various bonds. On Tuesday, Fitch, which in August 2016 downgraded the territory’s rum cover-over and gross receipt tax bonds, downgraded the U.S. Virgin Islands’ Issuer Default Rating (IDR) and the ratings of the dedicated tax bonds issued by the Public Finance Authority (PFA). The ratings have also been placed on negative watch.
The downgrades are as follows, according to Fitch:
–USVI IDR to ‘B’ from ‘B+’;
–VIPFA senior lien matching fund revenue bonds to ‘BB-‘ from ‘BB’;
–VIPFA subordinate lien matching fund revenue bonds to ‘BB-‘ from ‘BB’;
–VIPFA matching fund revenue bonds (Diageo project) to ‘BB-‘ from ‘BB’;
–VIPFA matching fund revenue bonds (Cruzan project) to ‘BB-‘ from ‘BB’;
–VIPFA gross receipts tax (GRT) revenue bonds to ‘BB-‘ from ‘BB’.
The venerable ratings firm cited its increased concerns about the territory’s liquidity following its difficulty in securing market access for a planned working capital borrowing. On Friday, Governor Kenneth Mapp warned the territory and lawmakers that if a sin tax measure was not adopted soon — the governor’s five-year economic growth bill that aims to raise taxes on products such as rum, tobacco, sugary drinks, internet purchases and timeshare unit owners, among others, or if the Senate failed to introduce a similar bill, which Mr. Mapp says will help raise tens of millions and eventually erase the territory’s structural deficit, which totals $110 million this year — then come February, the government would struggle to meet operational needs, including payroll, and would be completely incapacitated, relative to making payroll and other operational demands, by March.
“A rejection of the identification of new and immediate revenues to the territory, particularly to satisfy the financial markets that we’re moving out of structural deficits, would be a decision equal to saying that we would be cutting 11 to 14 percent of the budget for the Government of the Virgin Islands,” the governor said Friday during a press conference held at Government House on St. Croix. “That $110 million removal from the current budget of $787 million, I am not prepared to stand before the community and say this is exactly what that means, but I do not believe that there could be any person in this territory that believes that the removal of $110 million from the operating budget of the Government of the Virgin Islands, would not be an action that is painless.”
Read more: http://viconsortium.com/breaking-news/fitch-downgrades-usvis-issuer-default-rating-dedicated-tax-bonds/
