Bangkok--22 May--Standard & Poor's
Standard & Poor's Ratings Services assigned its 'BBB-' rating to the Government of Guam's (GovGuam) $202.425 million limited-obligation (Section 30) bonds, series 2009A. The outlook is stable.
"The rating is based on our view of bondholders' credit exposure to GovGuam as a speculative-grade ('B+' general obligation rating) entity, given that the bonds' security structure cannot completely isolate Guam's bondholders from the territory's financial condition," said Standard & Poor's credit analyst Paul Dyson. "There is also a moderate degree of uncertainty related to historical variances between the amount of Section 30 revenues related to income taxes requested versus ultimately granted, largely due to untimely certifications and retroactive adjustments due to overpayments or underpayments." We understand, however, the process by which such revenues are reconciled is improving, and Guam expects annual variances in future years to be reduced. In addition, historical pledged revenues have demonstrated resilience through economic cycles, weather-related occurrences such as super typhoons, and other macroeconomic events.
The bonds are being issued to fund the construction of a new solid-waste landfill, fund the costs related to the closure of Guam's existing Ordot Dump, prepay a $20.8 million loan from the Bank of Guam, fund a reserve fund, and pay capitalized interest.
GovGuam has been collecting Section 30 revenues since 1978, and its right to receive Section 30 revenues is granted by the Organic Act of Guam, Title 48, Section 1421h. Per the act, amended in 1984, Section 30 revenues include federal income taxes derived from military personnel and federal civil service employees on Guam, or who indicate Guam as their state of legal residence. These revenues comprised approximately 93% of pledged Section 30 revenues in fiscal 2008.
RELATED RESEARCH
USPF Criteria: "Special Tax Bonds," June 13, 2007
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Media Contact:
Ana Sandoval, New York (1) 212-438-5095, [email protected]
Analyst Contacts:
Paul Dyson, San Francisco (1) 415-371-5079
Theodore Chapman, Dallas (1) 214-871-1401
Key Contacts:
Americas Media Relations: (1) 212-438-6667
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Americas Customer Service: (1) 212-438-7280
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