British Virgin Islands

Tuesday, Jan 19, 2021

U.S.  Virgin Islands announces plan to refinance 54% of its bond debt

U.S. Virgin Islands announces plan to refinance 54% of its bond debt

U.S. Virgin Islands Gov. Albert Bryan Jr. announced a plan to refinance the government’s $1.1 billion in speculative grade matching fund bonds Tuesday in an effort to address the government’s more than $3.35 billion in net pension liabilities.
Bryan said he was calling the U. S. Virgin Islands Senate into session on Aug. 18 to consider his proposal. He talked about the plan in a 1 p.m. press conference and his government make a posting to the Electronic Municipal Market Access website.

The plan would be to create a special purpose vehicle that would receive the rum cover-over payments on U.S. rum sales that currently support the bonds. The new special purpose vehicle should allow the new bonds to pay at around 3.5% rather than the 6% that the current bonds are paying, Bryan said.

This would allow for $106 million in immediate present value savings, he said. It would also lead to a cash-flow to the territory of $85 million per year in the first three years. The bulk of this would be used to pay off some of the unfunded liability of the Government Employees Retirement System (the government pension).

Bryan said the government and legislature must move fast. He said he was hoping to complete the transaction by the end of September, when the fiscal year ends. If it is not completed by then, the government has some debt service payments connected with these bonds it would have to pay, he said.

He said the new bonds would likely have 20-year terms but might have 30-year terms. As currently conceived, the bond payments would grow in the second 10 years period of the 20-year term.

Bryan said he expected the new approach would lead to a $40 million per year stream of revenue. In addition he was hoping to get $20 million per year from his proposal to legalize and regulate marijuana on the island. Finally, he was hoping to get $7 million per year from the Hovensa petroleum processing facility.

In addition to matching fund bonds backed by rum sales, the territory had $861 million in gross receipts revenue bonds, $12 million in tobacco settlement bonds, and $78 million in federal aid highway bonds outstanding as of Sept. 30, 2018, according to its most recent audit.

Moody’s Investors Service rates the senior lien matching fund bonds Caa2 and the subordinate lien matching fund bonds Caa3.

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