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Fitch Ratings, One of Three Major Credit Rating Firms, Brings Territory Down Three Notches With The Promise It Will Sink Lower … Soon

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NEW YORK — Seeing few options for improvment to the territory’s finances,  Fitch Ratings took its credit rating on the Virgin Islands down all the way to triple-C from B.

That’s a steep three-notch downgrade, bringing it to a level that indicates significant risk of default.

Also, Fitch is maintaining a negative outlook.

The problem is a lot of bills, too much debt and little access to financial markets.

Here’s how the analysts explain their view:

The inability to access capital markets for debt issuance has added further stress, with a strained liquidity position giving rise to a sizable escalation in accounts payable. While the government has attempted to address this situation through proactive cash management, revenue enhancements and some expenditure reductions, Fitch believes that prospects for stabilization in the USVI’s financial position are limited.

Underfunded pensions are part of the problem. Fitch explains:

Budget imbalance will continue until such time as expenditures, including those related to retiree benefit obligations, are aligned with realistic expectations of future revenue performance, or economic growth well beyond current expectations bolsters revenue sources. The outstanding payables are expected to weigh on the USVI, as will a debt burden that has risen considerably following multiple years of borrowing to fund ongoing operations and the exponential growth in the net pension liability (NPL) of the pension system due to significantly inadequate annual contributions.

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The Author

John McCarthy

John McCarthy

John McCarthy is primarily known for his investigative reporting on the U.S. Virgin Islands. A series of reports beginning in the 1990's revealed that there was everything from coliform bacteria to Cryptosporidium in locally-bottled St. Croix drinking water, according to a then-unpublished University of the Virgin Islands sampling. Another report, following Hurricane Hugo in 1989, cited a Federal Emergency Management Agency (FEMA) confidential overview that said that over 40 percent of the U.S. Virgin Islands public lives below the poverty line. The Virgin Islands Free Press is the only Caribbean news source to regularly incorporate the findings of U.S. Freedom of Information Act requests. John's articles have appeared in the BVI Beacon, St. Croix Avis, San Juan Star and Virgin Islands Daily News. He is the former news director of WSVI-TV Channel 8 on St. Croix.

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