LOS ANGELES— Fitch Ratings affirmed its A-minus rating on Guam's business privilege tax bonds ahead of a planned $404.9 refunding Aug. 24.
The Series D BPT bonds are expected to sell via negotiation. Barclays Capital is senior manager, according to Thomson Reuters.
The action affects $371 million of outstanding BPT debt rated by Fitch. The outlook is stable.
The bonds are special limited obligations secured by a lien of 3% out of the 4% general business privilege tax levied on goods and services.
The legal provisions are strong and provide sufficient insulation from general fund operations to result in a rating on the BPT bonds that is significantly higher than would be the case for a general obligation pledge, Fitch analysts said.
The BPT is collected and held outside of the general fund and transferred on a weekly basis to the trustee.
Guam general obligation bonds are only rated by Standard & Poor's, which assigns its BB-minus rating.
Although the Guam economy is relatively small and is heavily reliant on tourism, Fitch said, some balance is provided by the strategic importance of Guam to U.S. military operations in the Pacific. Expansion has been delayed, but Fitch said Guam officials continue to expect the military presence on Guam to increase over the next 10 years.
Much closer to Asia than to the mainland United States, Guam is the westernmost territory of the U.S. There are approximately 6,000 active military personnel and 6,600 military dependents on Guam, out of a total population of 159,538, a number that is projected to grow over the next 10 years. Although the planned relocation of the Third Marine Expeditionary Force to Guam from Okinawa, Japan has been delayed and reduced from earlier forecasts, Guam officials still expect approximately 5,000 troops to be relocated to Guam.
"The rating reflects a structure and revenue pledge that insulates the bonds from Guam's somewhat weak general fund operations," Fitch analysts said. There is strong non-impairment language, and Guam cannot file for bankruptcy protection, they said.
