Irma hit the U.S. Virgin Islands harder

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Hurricane Irma’s financial impact on the U.S. Virgin Islands' government may be greater than that in Puerto Rico.

Whereas Irma passed within 48 miles of San Juan, on Puerto Rico’s north coast, and led to winds peaking at 75 miles per hour on Puerto Rico’s mainland, according to El Vocero, Irma passed within 20 miles of St. Thomas, on the Virgin Islands’ northern edge, according to Stacey Plaskett, the islands’ non-voting U.S. Congress representative. There were sustained winds of 150 miles per hour in St. Thomas and St. John, according to Gov. Kenneth Mapp.

The Virgin Islands government is in financial difficulties and owes $1.85 billion, according to Fitch Ratings. The Water and Power Authority is also struggling and owes at least $216 million.

The roof of the main hospital in St. Thomas was torn off, Mapp said in a video posted to the Virgin Islands Consortium news web site. Some of the hospital’s windows and walls were blown in. The hospital’s cancer care facility was demolished.

Mapp said there were significant losses of police and fire stations in St. Thomas and St. John, the territory’s other norther island.

Electricity was down in much of the territory’s three main islands.

On Thursday morning Mapp said that storm was likely responsible for four deaths in St. Thomas and that over time his government might become aware of more deaths.

Mapp said the damage to St. Croix was considerably less in than in the other two islands, which are about 40 miles north.

Both Moody’s Investors Service and S&P Global Ratings said that Irma’s affects would pressure the government’s already tenuous finances.

“Although the U.S. Virgin Islands’ government will receive [Federal Emergency Management Agency] assistance, the storm is likely to worsen the territory’s extremely weak liquidity,” Moody’s senior vice president Ken Kurtz said.

“The hurricane puts additional pressure on our CCC-plus/watch negative and CCC/watch negative ratings on the U.S. Virgin Islands’ matching fund notes and gross receipts tax notes, respectively,” S&P said. “With the territory currently grappling with severe fiscal and financial pressures, cash on hand which management indicated covered about three days of operations as of August will likely be unavailable to address the unbudgeted expenditures expected in the immediate aftermath of the hurricane.”

“It is our view that the territory will also experience headwinds to its tourism-based economy, which could have immediate and long-term pressures on revenues,” S&P continued. “IHS Markitt estimates that 33% of the territory’s GDP and 17% of employment are from tourism.” The effects of the hurricane will make it a less desirable place for tourism, S&P said.

“We also expect short-term pressure to the territory’s economy from any disruptions in rum production,” S&P stated.

While FEMA funds could help the territory’s economy in the medium term, once they run out, the territory’s inability to sell a bond for capital improvements could hurt the territory’s economic growth, S&P said.

On WAPA, S&P said that Irma’s impact on its credit quality would likely be negative. “WAPA does not have sufficient available reserves or liquidity that utility systems facing storm damage typically can tap until insurance companies or the Federal Emergency Management Agency reimburse eligible outlays.” S&P rates WAPA’s senior-lien bond BB-plus.

U.S. Transportation Secretary Elaine Chao called Mapp Thursday to tell him she was ready to release funds for the islands’ roads, Mapp said. The U.S. Army Corps of Engineers told Mapp that it was sending eight professionals to analyze WAPA’s St. John situation and help bring the power up on the island.

The islands’ senior matching funds bonds are rated Caa1 by Moody’s, CCC-plus by S&P, and B by Fitch. The gross receipts tax bond are rated CCC by S&P and B by Fitch.

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