Fitch Ratings downgraded $1.36 billion in Virgin Islands matching fund bonds citing lower-than-expected revenue.
Fitch on Thursday cut:
- $901 million of senior lien revenue (matching fund loan note) bonds to BBB from BBB-plus,
- $177 million subordinate lien revenue (matching fund loan note) bonds to BBB-minus from BBB,
- $250 million subordinated revenue (matching fund loan note - Diageo project) bonds series 2009A to BBB-minus from BBB, and
- $37 million of subordinated revenue (matching fund loan note - Cruzan project) bonds series 2009A to BBB-minus from BBB.
The rating outlook is stable.
Fitch said the final forecast for pledged revenue in fiscal 2013 (ending Sept. 30) is 12% lower than expected. Accordingly, the maximum debt service coverage for the senior indenture has been reduced to 2.78 times from 3.2 times, which was estimated in July 2013. The bonds are also dependent on rum production, U.S. government support for the present cover over program, and continuation of U.S. consumer tastes for rum, Fitch noted.
Fitch has a BB rating and a negative outlook on general obligation bonds from the United States Virgin Islands.
