Section 30 upgraded, other bonds affirmed
June 14, 2012
Standard & Poor’s re-rated all of Guam’s general government bonds floated over the past two decades, in light of new fiscal leadership from the island’s new Governor. The ratings are out, and the people of Guam have some news to celebrate.
Governor Calvo didn’t go to San Francisco in May just to fight for a good rating for the tax refunds bonds. He also fought to maintain our existing ratings for Guam’s other bonds, most of which were floated before he came to office.
Despite global and national financial instability, the Governor and his team accomplished an incredible feat: the upgrade of one of the bonds, and the affirmation of the rest. Some, including the legislative finance chairman, doubted the administration’s fiscal policies and suggested that its efforts to finance tax refunds would lead to a ‘credit negative’ on our bonds. That did not happen at all.
“The high credit ratings we got for the tax refunds bonds told us we were doing things right for that one issue,” Governor Calvo said. “With the upgrade and affirmation of the rest of our bonds, we now have a complete picture of our fiscal policies: we’re on the right track. I’m very proud of my fiscal team. We’re gonna keep moving forward to improve our financial house until everything is right in the people’s government. It just takes commitment. And we’re learning that sometimes we just have to ignore all the political rhetoric and noise that was obviously wrong.”
The Great News:
Section 30 Credit Upgraded from BBB- to BBB+ (Stable Outlook).  This is a 2-notch upgrade.
The Good News:
HOT Credit affirmed at BBB+ (Stable Outlook)
GO Credit affirmed at B+ (Stable Outlook)
COP (JFK Lease) Credit affirmed at B (Stable Outlook)
Compact Impact Credit affirmed at A- (Stable Outlook)
“The process of upgrading bond ratings typically takes two to three or more years to accomplish,” GEDA Administrator Karl Pangelinan said.  “Given today’s global market environment, maintaining credit levels while achieving an upgrade on the Section 30 bonds is quite an accomplishment. And when you consider that we’ve only been in office for 18 months, I think we’re on very firm footing here.”
Generally, these bonds have paid and are paying for the following:
–       General Obligation (GO) bonds — The legislature has authorized several of these over the past few years to finance the deficit
–       Hotel Occupancy Tax (HOT) bonds — The proceeds of these bonds will pay for several capital improvements related to tourism and Hagatna revitalization, including the new museum
–       Certificate of Participation (COP) bonds — This provided the leaseback financing for the new JFK High School
–       Compact Impact credits — This financed, through leaseback option, the building of four new schools
The tax refunds bonds are also known as the island’s Business Privilege Tax (BPT) bonds, which were floated in December 2011 and June 2012 to finance the tax refunds debt. These bonds received the highest credit ratings in the island’s history. The A (stable outlook) rating by S&P was also affirmed.
Standard & Poor’s released the reports today.  S&P cited its confidence in the Governor’s fiscal reform and leadership, stating, for example, “The government, under the administration of Governor Calvo, has put together a fiscal stabilization plan that puts fiscal discipline at the forefront,” and “…we believe that the government’s efforts to manage its budget are positives for future credit quality and that financial reporting and policies are improving…”
Please call Natalie Quinata at 475-9213 or 486-8887 for more information.

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