Moody’s upgrades territory’s ‘outlook’ from negative to stable
Pago Pago, AMERICAN SAMOA — Moody’s Investors Service has affirmed a Ba3 rating on American Samoa’s outstanding general revenue bonds and assigned the same rating — Ba3 — to the new 2021 bond series, which the American Samoa Economic Development Authority (ASEDA) announced last month that it plans to sell.
Moody’s announced on Tuesday that it has “revised the outlook on the Territory of American Samoa to stable from negative” and affirmed the Ba3 rating for American Samoa's outstanding general revenue bonds. Ba3 is the bond rate given to debt instruments that are generally considered speculative in nature.
“The territory has $117 million of general revenue bonds currently outstanding,” according to the rating company’s statement.
It also announced that Moody’s has assigned a Ba3 rating to American Samoa's $19.2 million General Revenue Bonds, Series 2021A (Tax- Exempt), $8.7 million General Revenue Refunding Bonds, Series 2021B (Federally Taxable) and $13.4 million General Revenue Refunding Bonds, Series 2021C (Federally Taxable).
In a public notice last month, ASEDA announced that the board of directors on Apr. 22 adopted a resolution in which it authorized the issuance and sale of Series 2021 bonds. (See Samoa News edition Apr. 27 and May 10 for details.)
According to Moody’s statement, American Samoa’s Series 2021A bonds will finance furniture, fixtures and equipment for the Fono Building and offices, which is the territorial legislature's building.
Proceeds from the Series 2021A bonds will also finance the construction of a new court building and the creation of a technical plan to relocate the current adult correctional facility.
Furthermore, proceeds from the Series 2021B & C bonds will refund certain outstanding Series 2015B & C bonds for savings.
Moody’s provided similar explanation as it did in previous statements when the first bonds were issues, as to the reasons behind the Ba3 rating — it reflects American Samoa's status as a US territory, which receives generous operating and capital assistance from the federal government.
The rating also factors in the territory's small and volatile economy with employment concentrated in government and tuna packing; low income levels; significant long- term liabilities; narrow, but improving financial position; and risks associated with operating a government- owned charter bank (referring to the Territorial Bank of American Samoa).
“The rating affirmation and outlook revision was driven by governance improvements, including enhanced transparency and disclosure and budget management,” the statement says.
According to Moody’s the “revision of the outlook to stable from negative reflects the territory's improved financial position resulting from governance improvements and evidenced by the restoration of a positive unassigned general fund balance for the last two years”.
The stable outlook also incorporates the government's better financial discipline and significant federal government support received in response to the coronavirus pandemic, which will enable the territory to weather economic swings that may occur in the next two years, according to the statement.
Samoa News points out that former Gov. Lolo Matalasi Moliga prior to leaving office, announced that the government was in the black, with a surplus, in the last four years, and that it’s important to maintain this status — for among other things — American Samoa’s financial rating for its bonds.
According to Moody’s the general revenue bonds are backed by the full faith and credit of the territory. They are additionally secured by a pledge of specific revenue.
As defined by the bond indenture, the pledged revenue comprises personal income taxes, corporate income taxes and certain excise taxes that include a tax on imported beer, malt extract, alcoholic beverages, motor vehicles and other items. The pledge of tax revenue is subject to the prior deduction of certain legislative earmark deductions.
Moody’s also shared two-factors that it says could lead to an upgrade of the current ratings: Diversification and growth of economy and substantial improvement in financial management and financial position coupled with reduced liabilities.
Factors that could lead to a downgrade of ratings: Weakening of financial position; Economic deterioration; Reduction of US federal government support; and significant increase of debt and pension liabilities.
Details and other information on Moody’s rating is online [www.moodys.com].