Virgin Islands Bonds Placed on S&P Watch Negative

S&P Global Ratings said it placed its B rating on the Virgin Islands Public Finance Authority's matching fund loan notes, senior- and subordinate-lien bonds, issued for the U.S. Virgin Islands (USVI), on CreditWatch with negative implications.

At the same time, S&P said it placed its B-minus rating on the authority's gross receipts tax bonds on CreditWatch with negative implications.

The CreditWatch placement follows USVI's growing liquidity challenges. "The territory indicated that it currently holds approximately two days' cash on hand and may not have sufficient cash to meet obligations including pay-roll obligations due in March without additional external liquidity or significant budget cuts," said S&P credit analyst Oladunni Ososami. "In the past month, the territory's liquidity has been below 10 days' cash, which we believe leaves USVI vulnerable to cash flow insolvency."

Given the urgency of the territory's liquidity issues, the territory will need an infusion of cash to continue to pay its operating expenses, S&P said. The territory's access to external liquidity to deal with immediate cash flow needs remains contingent on USVI enacting its proposed revenue enhancements outlined in the governor's five-year financial plan to close its $110 million current deficit.

The enactment of the measures depends on legislative approval, which has been delayed in the past and remains uncertain.

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