Aug. 30, 2006 — Receiving an investment-grade bond rating of Baa3 — the lowest investment-grade rating offered by Moody's Investors Services — is the first step in creating a high rating structure for the territory, representatives from Moody's and the government's financial team said Wednesday.
However, both Emily Raimes, an analyst from Moody's, and Nathan Simmonds, head of the government's financial team, added that the territory would be able to receive a rating upgrade if the government continues to streamline its fiscal policies and increase its revenues and tourism numbers.
"Right now, however, the Baa3 rating is a good thing," Raimes said. "Because what it does is reduce the cost of borrowing money to the territory. It also makes the bonds safer for investors, since a lot of people who want to buy bonds invest in those securities with an investment-grade rating. It also gives the government access to a larger pool of investors."
This includes larger companies, which have more "confidence" that bonds floated by the territory are "a more stable risk," Simmonds said when contacted Wednesday afternoon. While he did not get into specifics, Simmonds said the rating, overall, means that V.I. bonds will now be more accessible on the capital market and will "attract a wide range of investors."
"But we will continuously be attempting to get our rating upgraded, as we continue to properly manage finances, generate timely reports and take care of our debt," he added.
At a press conference held at Government House Tuesday, Simmonds specifically addressed the issue of taking care of the more than $1 billion unfunded liability plaguing the Government Employees Retirement System.
At the time, Simmonds said the government would be looking into issuing about $300-$500 million worth of pension obligation bonds to take care of a portion of the debt. The rest of the debt will be covered through various other revenue sources, including appropriations from the General Fund and the Internal Revenue Matching Fund, he said.
On Wednesday, Simmonds added that the rating could significantly reduce the cost of issuing the bond, which will not, he said, contribute to the government's general obligation debt.
"Since it's not a general obligation bond, it will not impact our remaining bonding capacity," he added.
While Simmonds did not say how the debt incurred through the issuance of the pension obligation bonds would be repaid, he did say the government "remains confident" in its ability to cover the debt.
Moody's has assigned Baa3 ratings to other jurisdictions such as Puerto Rico and the city of Buffalo, N.Y., along with various banks, schools, hospitals and agencies.
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