S&P Global Ratings said it has lowered its ratings on Virgin Islands Water and Power Authority's (WAPA) electric system revenue bonds, with the senior-lien debt dropping to BB-plus from BBB-minus, and the rating on the authority's subordinate-lien debt falling two notches to BB-minus from BB-plus.
The outlook is negative
"The downgrade reflects weakened debt service coverage and liquidity, due in part to delayed payments on government-related accounts," said S&P Global Ratings credit analyst Peter Murphy.
WAPA's finances are somewhat vulnerable, S&P said. Accounts receivable remain a credit risk, although some progress has been made in past few months, cutting the balance roughly in half as of fiscal year-end 2016 (June 30).
Accounts receivable as of June 30, 2015, were high, S&P said, at $45.2 million or 17% of operating revenues. The agency views the authority's unrestricted cash and investments at fiscal year-end 2015 as low, at about 16 days' operating expenses; including amounts available under bank lines of credit, liquidity is only adequate.
Available bank lines of credit, however, enhance liquidity somewhat, and have recently been extended to June, 2017. WAPA has a low cash position, which has improved due to recent collections on amounts owed from the USVI government.
The authority has $127 million of senior-lien and $104 million of subordinate-lien bonds. Net electric system revenues secure the bonds.
