WASHINGTON — The Internal Revenue Service is auditing $219.49 million of revenue bonds that were issued by the Virgin Islands Public Finance Authority in 2006.
The authority was informed about the audit in March but just disclosed it, according to the notice it filed with the Municipal Securities Rulemaking Board’s EMMA system.
According to Fitch Ratings and Moody’s Investors Services, the VIPFA plans to issue $159 million of revenue bonds the week of Aug. 21.
The bonds are expected to be privately placed and will be backed by payments from the United States government from excise taxes on rum.
The transaction is to close on Aug. 29, Fitch said in a release.
Proceeds from the bonds will be used to balance the Virgin Islands government’s general fund budget in fiscal 2012 to 2014, pay tax refunds and other payables and fund capital projects.
Moody’s assigned a Baa2 rating to the revenue bonds, while Fitch assigned a BBB-plus. Both Fitch and Moody’s said the outlook for the VIPFA ratings are stable.
VIPFA officials could not be reached to comment on whether the authority disclosed the audit because of the forthcoming bond issue.
Meanwhile, the authority said in its notice that the audit is ongoing and that it “could impact the exclusion from gross income of interest on the 2006 bonds and 1999 bonds.”
“The government believes that it complied with all federal tax requirements applicable to both the 2006 bonds and the 1999 bonds, and is working with its counsel to address the audit,” the authority said.
A portion of the 2006 bond issue was used to partially refund $299.88 billion of revenue bonds that the authority had issued in November 1999, according to the notice.
The 1999 bonds were issued as long-term working capital bonds to address the cash-flow needs of the Virgin Islands government.
UBS Securities LLC was the underwriter.
Buchanan Ingersoll & Rooney PC was bond counsel. Duane Morris LLP was underwriter’s counsel, according to bond documents.