THE government of Guam has received a Section 30 credit upgrade from Standard & Poor’s, upgrading a previous rating of BBB- to BBB+, a 2-notch upgrade indicating a more “stable fiscal outlook” for the island.
Section 30 monies refer to taxes remitted by local military personnel and federal workers to the Guam Treasury; GovGuam floated a bond based on these Section 30 revenues.
Credit ratings express an agency’s opinion, such as S&P, about “the ability and willingness of an issuer, such as a corporation or state or city government, to meet its financial obligations in full and on time.”
Gov. Eddie Calvo said, “The high credit ratings we got for the tax refund bonds told us we were doing things right for that one issue.”
He added: “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.”
GEDA Administrator Karl Pangelinan said: “The process of upgrading bond ratings typically takes two to three or more years to accomplish.”
Given today’s global market environment, according to Pangelinan, maintaining credit levels while achieving an upgrade on the Section 30 bonds is quite an accomplishment.
In addition, the tax refund bonds, aka Business Privilege Tax bonds, received the highest credit ratings in the island’s history.
Comments
Bonds rated BBB- and higher are investment grade. Bonds below that are "junk" bonds.
GovGuam just went from barely investment grade, to two notches higher. This will probably not make a big difference.
This is the same S&P that rated all the subprime "Toxic Assets" as AAA (highest rating) until these assets discombobulated , and caused the 2008 banking crisis in the US.
At this point, I would be surprised if most foreign banks took the S&P seriously. These banks were all damaged when the US Subprime Toxic Assets lost value.
In other words BBB+ and a quarter may buy GovGuam a cup of coffee.
Sincerely,
Phil Dauterman
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