Investment grade bond rating sought by U.S. Virgin Islands in midst of economic expansion

Official release

Charlotte Amalie, USVI – May 23, 2006: The U.S. Virgin Islands, experiencing an unprecedented economic expansion and budget surplus, is seeking an investment grade bond rating for the territory from the key rating agencies: Moody’s Investors Service, Standard & Poor’s and Fitch Ratings.
The effort entails the preparation of major financial reports on the state of the territory’s economy and the government’s financial condition, followed by a series of meetings in New York and on-island with representatives of the key bond rating agencies.

Governor Charles W. Turnbull said, “The financial health of the government is the best it has been in years as we are experiencing consecutive year budget surpluses, record tax revenues, and lower unemployment. An investment grade rating from Standard & Poor’s and Moody’s Investors Service would be a great achievement for the government of the Virgin Islands.”

A favorable bond rating would enable the government to seek municipal financing and borrow money at the most favorable interest rates. An investment grade bond rating would allow the government to issue bonds without tying up specific tax revenues such as gross receipts taxes or rum excise taxes, for example. It would also enhance the marketability of the territory to potential investors, including EDC applicants who would have a more favorable view of the Virgin Islands as a place to live, work and invest. In addition, a more favorable bond rating would encourage vendors to extend credit to the territory under better terms.

To facilitate this effort, Governor Charles W. Turnbull has appointed a task force led by Kent Bernier, Interim Director of Administration of the Public Finance Authority. The Credit Rating Task Force includes the Turnbull government’s top financial team and those responsible for the turnaround in the government’s financial condition. They include Finance Commissioner Bernice Turnbull; Budget Director Ira Mills; Nathan Simmonds, Director of the office of Fiscal and Economic Recovery; Louis M. Wills, Director of the Bureau of Internal Revenue; Solicitor General Elliott Davis; Bureau of Economic Research Director, Lauritz Mills, as well as financial advisors from Banc of America Securities, Managing Director Margaret Guarino and Vice President Lawrence Soule.

Kent Bernier said, “The government has made great strides at improving its financial condition over the past seven years and is now in a position to seek an investment grade rating. In that regard, we are now preparing the requisite financial reports and we will be making presentations to the rating agencies in the Virgin Islands in July.”

As part of the review, representatives from Moody’s Investors Services and Standard & Poor’s will visit all three islands and make special stops at the Hovensa Oil Refinery and Cruzan Rum distillery on St.Croix, as well as observe the islands’ infrastructure and natural beauty.

Some of the factors that will be considered by the rating agencies include: the government’s overall financial performance in recent years, current and future tax revenues, government expenditures, a review of the government’s key management personnel, a review of audited financial statements, economic trends, territory-wide demographics, labor force characteristics, tax base, tourism industry, socio-economic trends, diversity of industry and employers, etc.

While the effort to gain an investment grade rating is not assured, the fact that the rating agencies have agreed to review the territory’s financial condition is a major accomplishment. Even if the rating agencies were to put off their decision, they would supply the government an analysis of what financial issues need to be addressed. The VI government would then have the opportunity to correct outstanding issues and could soon reapply.

Official web site: http://www.governorturnbull.net

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