Global securities company Kroll Bond Rating Agency (KRBA) has assigned a preliminary long-term rating of BBB with an outlook of “stable” to the Matching Fund Special Purpose Securitization Corporation (MFSPSC) bonds being prepared for sale by the Territory as a steady revenue stream to stabilize the Government Employees’ Retirement System.
The MFSPSC is the Special Purpose Vehicle (SPV) created by the Legislature in Act No. 8540 to issue the bonds. It is a separate entity from the Government of the Virgin Islands (GVI) and is a type of entity commonly used in municipal financing and carries its own bond rating separate from the GVI.
The MFSPSC allows the use of the Rum Cover-Over Bonds to be reissued for a significant reduction in interest and debt service costs to provide long-term financial support to the GERS.
Preliminary to the issuance of the bond rating by KRBA, the U.S. Treasury and the Department of Interior (DOI) agreed to Governor Bryan’s instruction that the matching fund revenues paid out by DOI from the Rum Tax Cover-Over are to be deposited into a restricted account to be paid out to the SPV as the purchaser of the rum revenues while its bonds are outstanding.
“These are major steps in the process of issuing these bonds, and my team has prioritized the additional documents and steps still to be undertaken over the next three weeks before we get to the final goal,” Governor Albert Bryan Jr. said. “As anticipated, the SPV has received an investment-grade bond rating. The KRBA report also said this bond rating could be upgraded with the addition of ‘incremental revenue streams.’”
In its pre-sale announcement, KRBA said that “the combination of the Act, the bankruptcy remoteness of the Corporation, the Sale Agreement, and the Indenture provide the Bonds with a strong legal framework that KBRA believes will substantially insulate the pledged Matching Fund Receipts and the Corporation from the credit risk of the Virgin Islands.”
“As we indicated previously, this rating is being given to the SPV as a separate entity from the GVI with a clean financial record and the use of proven revenues for supporting the issuance of its bonds that will go to support
the undertakings of the GVI,” Governor Bryan said about the preliminary bond rating.