S&P Global Ratings announced that its ratings on all debt related to obligors in or associated with Guam and the U.S. Virgin Islands are unchanged by the signing into law of the Puerto Rico Oversight, Management, and Economic Stability Act (PROMESA) due to the rating agency’s continued focus on credit fundamentals.
“While the law provides Puerto Rico and other U.S. territories access to a potentially more orderly process for debt restructuring, our credit ratings reflect the relative likelihood of default and our view of the obligors’ capacity and willingness to pay debt on an ongoing basis – not the process for restructuring debt once an obligor defaults,” the agency stated.
It is important to note that S&P rates a majority of Guam’s bonds. Further, the agency understands that the Government of Guam has been practicing sound fiscal management and has now an established record of meeting its debt obligations in a timely manner. These were factors in the decision as it has watched the various territories.
“In our view, given the direct link between worsening fiscal distress and the likelihood of other territories’ seeking to establish their own oversight boards, our ratings continue to focus on pre-default credit fundamentals, including the ongoing ability to pay obligations in full and on time,” the agency stated.
“Consistent with this view, S&P Global Ratings lowered the ratings on various Puerto Rico-related bonds in several instances over the past four years to reflect this greater likelihood of default, long before PROMESA was enacted or even proposed. We note that while the existence of restructuring regimes such as PROMESA or Chapter 9 might be helpful to establishing an orderly restructuring of debt, their absence does not prevent insolvency or debt default.”
Governor Calvo maintains that Guam does not need bankruptcy protection.
“Since coming into office, my administration has made it a priority to build our government’s financial strength and show our investors that we remain committed to our responsibilities,” Governor Calvo stated.
“I respect that there has been much speculation from the financial industry with the federal government’s passage of PROMESA, but this is something that we clearly stated was unnecessary for us here on Guam. I appreciate that S&P recognizes our efforts and our intent.”
The Governor’s Fiscal team continues to communicate with Bond Counsel, Underwriters and investors to mitigate effects of the passage of PROMESA.