Standard & Poor’s upgraded $236.7 million of Guam general obligation bonds to B-plus from B.

“The upgrade is based on the general government’s improved financial performance, the direct result of greater political consensus to enhance revenues and control expenditure growth, including for the Guam Public School System, as well as leadership more fully addressing the substantial unfunded long-term liabilities on Guam’s balance sheet,” said analysts Theodore Chapman and Paul Dyson in a report Wednesday.

The Pacific Ocean island territory received its first unqualified financial audit opinion last year, while posting a $14 million general fund surplus, they said. It also revised its retirement benefits to a defined contribution plan from a defined benefit plan, which should help it address a $1.3 billion unfunded liability in its retirement fund.

Standard & Poor’s said Guam merits a “highly speculative-grade” rating because of a “massive historical budget imbalance,” an economically sensitive tourism-based economy, and the risk of economically devastating typhoons.

The government plans to issue another $271.6 million of GOs this year to finance past-due retirement fund contributions and cost-of-living adjustments, delinquent tax refunds and improvements at Guam Memorial Hospital.

Guam is not rated by Moody’s Investors Service or Fitch Ratings.

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