PHOENIX- American Samoa's $78 million of general revenue bonds now have a negative outlook from Moody's Investors Service, the rating agency announced this week.
Moody's affirmed the South Pacific territory's bonds at Ba3 Monday, but moved the outlook to negative following the recent closure of one of American Samoa's tuna packing plants, highlighting analysts' uncertainty about the future viability of the tuna industry, a focus of the territory's economy.
Moody's has rated American Samoa's debt, which is triple tax-exempt, since July 2015 and it has always been Ba3. Prior to 2015 American Samoa had no bond debt, though it had borrowed from its pension system and had two loans from the federal government, one from the Department of Interior and one from the Federal Emergency Management Agency. The territory of roughly 57,000 people some 2,700 miles southwest of Hawaii has some economic issues that reflect its junk rating and which analysts have said may make them suitable only for institutional investors.
Of particular interest is the volatility of American Samoa's economy, which is highly concentrated in the government sector and in the tuna industry. Tuna canneries account for 13% of employment and 21% of total private sector employment, and the island's tourism industry is limited to about 20 cruise ship landings annually, Moody's said. The island has historically had an advantage in packing tuna because it can ship the product to the U.S. duty-free and can label the product as American-made. But the territory is required to raise its minimum wage, Moody's noted, and the recently-renewed Pacific Tuna Treaty may increase costs for tuna fishermen and limit supplies of tuna.
In December 2016 one of the territory's two tuna canneries closed, with an estimated loss of 800 jobs and $800,000 in annual tax revenues, which the rating agency said is significant considering the small size of the territory's population and budget. The island carries a debt per capita of $1,624, lower than other territories but well above the state median of $1,025.
