Hawaii, emptied of tourists by coronavirus, gets another negative outlook

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Hawaii, its primary industry all but shut down, had its outlook revised to negative by Fitch Ratings, which affirmed the state’s issuer default rating at AA-plus.

Monday's revision from stable affects $6.9 billion in outstanding general obligation bonds and $4 million of certificates of participation.

Moody's Investors Service revised the state's outlook to negative April 15.

Hawaii Gov. David Ige on Saturday extended the state's stay-at-home and visitor quarantine orders through May.

The rating outlook revision “reflects the considerable economic pressure faced by the state as it confronts the economic impacts of the coronavirus pandemic,” Fitch analysts wrote. “The sudden economic shock brought by the pandemic and the severe recession now unfolding as being well beyond the routine cyclicality typically faced by state and local governments and reflected in (issuer default ratings).”

In the seven days through Thursday, visitor arrivals into Hawaii averaged 336 per day, according to state tracking data. A typical April day in 2019 saw more than 30,000 inbound arrivals.

All arrivals into the state, whether visitor or resident, are required to proceed immediately to a 14-day quarantine. Gov. David Ige on Saturday extended the visitor quarantine, and general stay-at-home requirement for residents, through May.

While Hawaii has a track record of very strong operating performance, Fitch analysts said its ability to absorb the shock and maintain financial resilience will be tested by the duration of the lockdown and the trajectory of its recovery.

Hawaii's tourism industry, a pillar of the economy, is most affected, and its recovery will depend in part on the trajectory of the downturn in markets from which visitors originate and potential changes in travel patterns, according to Fitch.

So far the state has avoided the worst from COVID-19, which has killed 15 in Hawaii out of about 50,000 deaths nationwide.

Hawaii's COPs were affirmed at AA. The GO bonds are general obligations of the state of Hawaii that carry the full faith and credit pledge of the state. The COPs are secured by lease payments subject to legislative appropriation.

The negative outlook indicates the direction the rating is likely to move over a one- to two-year period; however, it does not imply that a rating change is inevitable.

The outlook revision, and evaluation of the state's credit quality going forward, are informed by Fitch's coronavirus downside scenario. In the near term, Fitch said, the state will need to carefully manage the considerable economic and fiscal uncertainty caused by the coronavirus pandemic.

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