Fitch Downgrades U.S. Virgin Islands Matching Fund And Gross Receipt Tax Bonds To Junk Status
Another top U.S. ratings firm has downgraded the territory’s bonds, compounding an already precarious situation for leaders here as they contemplate floating bonds to meet a $110 million budget shortfall. The move comes three weeks after Moody’s downgraded the territory’s matching fund bonds, and adds gross receipt tax (G.R.T.) bonds to the mix.
Both the gross receipt tax and matching fund bonds — the latter backed by rum revenues — have been downgraded to B+ from BB), sending both bonds further into junk status. Additionally, the U.S.V.I.’s issuer default rating (which is the territory’s general credit rating), was downgraded to B+ from BB-.
In simple terms, the more the territory’s bond ratings are downgraded, the more difficult and expensive it becomes to float bonds. In July, Finance Commissioner Valdamier Collens said that the bond downgrades essentially prevented the government from restructuring its debt.
“Whereas we were between the 4 1/2 to 5 percent or even lower in some of the bonds that we’ve issued in recent years, this effect has caused the projected yields to be up 2 to 3 percent higher, and in that regard, it would not make a whole lot of sense to restructure, [for example], your mortgage for a higher rate when you’re already getting a lower rate,” he said.
Read more: http://viconsortium.com/business/fitch-downgrades-u-s-virgin-islands-matching-fund-gross-receipt-tax-bonds-junk-status/