Moody’s announced Thursday that the outlook on Guam’s General Fund credit ratings has been revised to “stable” from “negative.”
This outlook action will also apply to Guam Waterworks Authority (GWA) outstanding bonds.
Guam’s rating outlook had been changed last May due to the negative impact of the COVID-19 pandemic on the General Fund and GWA’s fiscal condition.
Although the government had been placed on a negative outlook, it was also able to avoid a rating downgrade that occurred in many other tourism-driven markets.
As stated in Moody’s press release, “The revision of the outlook to stable from negative reflects Guam’s improved fiscal outlook following the passage of the American Rescue Plan Act (ARPA), which includes additional direct federal government assistance to the government of Guam as well as recurring revenue from annual federal reimbursements of the territory’s Earned Income Tax Credit (EITC) and Child Tax Credit (CTC), which amounts to about $80 million, or 10% of general fund revenue. ”
The current Moody’s rating for Guam’s General Obligation Bond credit (Ba1 stable) remains the highest rating in 20 years with the outlook change to stable putting Guam in the strongest credit rating position in recent history.
The outlook change, which occurred prior to GovGuam lifting restrictions for visitor arrivals, speaks to the strength and commitment of the Leon Guerrero-Tenorio Administration’s fiscal team in managing its finances during the pandemic
Guam is one of the few municipal credits with a tourism-focused economy that has seen positive rating action during the pandemic.
“With the expectation of a return of tourism, an important component of Guam’s economy, GovGuam is optimistic in achieving an investment-grade rating in the future which Moody’s states will largely depend on “a multi-year improvement in general fund liquidity and financial performance”, says Governor Lourdes Leon Guerrero.
“Since the start of the COVID-19 pandemic, GovGuam has already been able to refinance nearly $150 million in outstanding debt obligations for significant savings with an additional $275 million expected with the upcoming Business Privilege Tax (BPT) bond refinancing.”