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Virgin Islands’ Matching Fund Securitization Corp. Seeking $1 Billion From The Financial Markets This Week

Virgin Islands' Matching Fund Securitization Corp. Seeking $1 Billion From The Financial Markets This Week

CHARLOTTE AMALIE — The Virgin Islands’ Matching Fund Securitization Corporation will seek to refinance nearly $1 billion in outstanding matching fund bonds this week.

The Legislature approved the deal in a Special Session held Thursday night. Senators passed the bill on an eight-to-six vote.

The Matching Fund Securitization Corporation is a special purpose, independent and autonomous public corporation and government instrumentality of the territory.

The matching fund bonds account for almost 54 percent of the government’s outstanding bond debt. The bonds are backed by taxes on the sale of USVI rum in the U.S. mainland.

The official statement said the tax-exempt bonds will have maturities from 2021 to 2039. The taxable bonds will have maturities from 2023 to 2028.

Ramirez & Co. is the lead underwriter on the pact. Bank of America Merrill Lynch and Jefferies are junior underwriters.

Ramirez is testing the financial market waters right now, according to Richard Tortura, president of Capital Market Advisors, the Virgin Islands’ financial advisor.

“It’s a brilliant structure,” Tortura told The Bond Buyer. “We think it will get a good reception.” Tortura said the bonds might be sold as soon as this week. If that doesn’t take place, the hope is to sell the bonds by the end of the month.

There are 10 series of bonds that are being refunded, Tortura said. Two of the series have no call feature. Others are not currently refundable as tax-exempt. Some of the latter will be offered on the market with a deadline for bids.

The Virgin Islands government expects profits by selling the bonds this fiscal year as opposed to next; the Virgin Islands’ fiscal year ends this month.

Kroll Bond Rating Agency gave the bond a BBB rating with a stable outlook. No other ratings agencies have put a rating on the deal.

Total long- and short-term debt outstanding for the Virgin Islands as of September 30, 2018, according to a comprehensive annual financial statement, was $2.642 billion. The outstanding balance remaining for the deal is $2.11 billion of bond debt. This excludes the Virgin Islands Water and Power Authority (WAPA) and its debts.

Along with a substantial amount of debt outstanding, the Virgin Islands’ government is also struggling with how to meet $3.35 billion in net pension liabilities obligations. Fitch rates WAPA’s debt CCC and has it on a ratings watch negative.

Governor Albert Bryan, Jr. said that selling the refinancing bonds would help put some money toward the underfunded pensions. He is also proposing the legalization of marijuana and the taxation of its sales as another step toward improving the territory’s finances.

The architects of the Virgin Islands’ Matching Fund Securitization Corp. plan to refinance $943.6 million of outstanding matching fund bonds as soon as this week.

The official statement was posted to on Saturday. The offering is for $760 million of tax-exempt bonds and $184.6 million of taxable bonds.

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