Moody’s considering further downgrade for Guam bonds; ‘not unique,’ says GEDA


Moody’s Investors Service is considering downgrading Guam’s Ba1 rating, and “the ratings of most of the island’s” bonds, according to an article posted on The Bond Buyer website.

The Guam Economic Development Authority was quick to issue a response, saying that the ratings warning would have “no impact on Guam’s debt service despite (the) reviews and outlook change.”

Moody’s and other bond rating agencies have expressed concern over the reduction in tourist arrivals to Guam due to the spread of COVID-19  and how that decline will affect GovGuam revenues.

Moody’s put the Ba1 rating for GovGuam on review on March 25 along with its Baa2 rating on the Guam Waterworks Authority.

On March 30, the Baa2 ratings on the “senior bonds” for both the Guam Port Authority and the Guam Power Authority were placed on review. On the same day, the Baa2 rating on the Guam Airport Authority senior revenue bonds were put on negative watch.

The Bond Buyer quotes Moody’s Senior Vice President Ken Kurtz as saying that in the two weeks since putting the ratings for Guam under review, “the evaporation of tourism continues.”

Kurtz said his coming review of Guam’s bond ratings would be based on the amount of aid the federal government would be providing to the territory.

He pointed out that the CARES Act provides the territories with less money than the states and he would be looking to see if future federal aid packages have more money for Guam.

GEDA Response

In a release, GEDA said the “recent decisions by the Moody’s Rating Agency on Guam credits arrive amid outlook changes, reviews, and downgrades across the country by ratings agencies.”

And despite the announcement to place Guam bonds on “Review for Possible Downgrade” that “will have no impact on Guam’s debt service” because the debt service payments are fixed.

The GEDA release states that “Review for Downgrade” is a term used to let the issuer know that it will now require a review of identifiable events and short-term trends that may cause ratings to be placed under special surveillance.

“The Guam Economic Development Authority emphasizes that these recent actions by Moody’s are not unique to Guam nor does it impact the fixed amount of debt service payments or the government’s ability to pay debt service on time,” said Ricky Hernandez, the deputy administrator of GEDA.

“Despite the economic downturn created by the COVID-19 crisis, the government of Guam continues to fully prioritize its payment of bond and debt obligations,” he said.