National bond-rating agencies Friday affirmed their investment-grade bond ratings on the Public Finance Authority’s Matching Fund Bonds, showing what the governor said was confidence in efforts to rebuild the territory’s economy.
In anticipation of the sale of Matching Fund Bonds by the Public Finance Authority, Fitch Ratings confirmed its BBB+ rating and Moody’s confirmed its Baa2 rating, each with a stable outlook, while Standard & Poor’s affirmed their ‘BBB’ rating and upgraded the outlook from stable to positive, Government House announced in a Sunday new release.
The PFA plans to issue Matching Fund Bonds secured by Virgin Islands cover-over revenues derived from excise taxes paid by rum companies that export product to the United States mainland.
“We greatly appreciate this confirmation of the strength and success of our rum industry development program," Gov. John deJongh Jr. said. "As we continue to work to rebuild our economy and seek a constructive resolution of Hovensa’s closure, this affirmation of support from the investment community is particularly important. This will allow us to fund the remaining authorization of working capital to support this year’s and next year’s budgets, and if the Senate agrees, to continue our capital investment in the territory.”
"By now it should be clear to all how important our partnerships are with Cruzan and Diageo, as they continue to provide strong support during difficult times," de Jongh added.
In its review, Standard & Poor’s noted that the production of Captain Morgan rum by Diageo in the Virgin Islands beginning in 2012 has doubled the amount of matching fund revenues that support the bonds, making the bonds more secure, the government House news release said. They also point to a long track record of increasing revenues, and strengthened competitive positions for Virgin Islands rum producers, including strong market share for Virgin Islands bulk rum.
S&P, Fitch and Moody’s have left the investment grade ratings on PFA Matching Fund Bonds unchanged since the 2008 economic downturn, and view them as insulated from the financial challenges facing the government. S&P went so far as to indicate that ratings could be improved if the rum production and bond coverage projections are realized, with the expectation that revenues and expenditures will stabilize.
“The bond rating agencies and the institutional investor community understand the strength of the matching fund bonds,” noted Commissioner of Finance and PFA Executive Director Angel Dawson, Jr. “The market feasibility consultant, IHS Global Insight, has projected continued matching fund revenue growth. The government has been an active partner in spurring the continued growth of this industry in the Virgin Islands. Our issuance of Matching Fund Bonds over the past several years has been critical to keeping our economy working.”