U.S. Virgin Islands water, power authority may default on July 1

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The U.S. Virgin Islands Water and Power Authority may default on paying $49 million of bond anticipation notes on July 1, according to Fitch Ratings and Moody’s Investors Service.

Moody’s Vice President Kathrin Heitmann told The Bond Buyer Wednesday, “Our Caa2 senior electric system revenue bonds rating and Caa3 subordinated electric system revenue bonds rating with a negative outlook continue to reflect a high probability of default for the U.S. Virgin Islands’ Water and Power Authority (WAPA). We expect WAPA will likely be able to make debt service payments on the rated senior and subordinate electric system revenue bonds on July 1.

“However, WAPA will be challenged to refinance the unrated bond anticipation notes due this July 1, 2020, or extend their maturity. WAPA has very limited cash on its balance sheet, which is likely insufficient to redeem all outstanding bond anticipation notes at maturity,” she said.

The Bond Buyer contacted WAPA for a comment around noon on Monday and again on Thursday morning. On Thursday, WAPA Spokesman Jean Greaux Jr., sent an email stating, “I have received no feedback from those that your questions were shared with.”

WAPA has $178 million of electric system senior and subordinated bonds outstanding, according to Fitch Ratings.

Fitch on Friday released a statement maintaining a ratings watch negative and CCC rating on the authority’s two bond types.

“Maintenance of the ratings watch reflects risks related to the authority’s debt profile and near-term maturities. WAPA faces debt service obligations on July 1, 2020, that include scheduled bond anticipation note (BAN) maturities totaling approximately $49 million that will require external financing or maturity extension,” wrote Fitch Managing Director Dennis Pidherny, Director Andrew DeStefano, and Senior Director Joanne Ferrigan.

“Overall, the ‘CCC’ rating continues to reflect heightened default risk as a consequence of WAPA’s exceptionally weak cash flow and liquidity. Based on unaudited information provided to Fitch by the WAPA, the authority maintains modest amounts of cash on hand and borrowing capacity that is insufficient to service the full amount of scheduled maturities,” the Fitch analysts wrote.

On Thursday Saybrook Fund Advisors Co-managing Partner John Schultz said bond trustees had told him that WAPA has enough money to pay $15.5 million in BAN principal and interest due on July 1 to Saybrook.

Schultz said WAPA owes about $35 million for a separate BAN on July 1 or July 15 to Nuveen. Schultz said he was unsure if WAPA had the money to pay this.

Nuveen did not immediately respond with a request for a comment for this story.

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U.S. Virgin Islands Junk bonds Virgin Islands Water and Power Authority