Fitch placed the territory’s credit rating on negative watch in January following a downgrade, citing “increased concerns about the USVI’s liquidity following its difficulty in securing market access for a planned working capital borrowing.”
The other two major credit ratings agencies, Moody’s and Standard and Poor’s, have also downgraded the territory’s rating over the past year and currently give V.I. bonds “speculative” or “junk” status.
In the statement Fitch issued on Monday, the agency said its continuing negative watch on the V.I.’s bonds reflects additional disclaimers following the release of the territory’s comprehensive annual financial report for fiscal year 2016.
BDO, the auditor on the financial report, said a significant amount of documentation was lacking that could have supported key financial items including tax revenues, payments in lieu of taxes, income tax receivables, and federal grants.
Fitch said that its negative watch of the V.I. is expected to be resolved soon, but the agency noted that the V.I.’s rating could be downgraded further if Fitch determines that the territory’s position has weakened based on its latest audit. The agency said it expects to speak with the independent auditor in the near future to determine “how, if at all, its findings impact the robustness of updated cash flow statements provided by [the territory].”
Fitch’s statement indicates that the agency continues to find the V.I.’s financial situation precarious.
“The inability to access capital markets for debt issuance has added to the pressure on its financial situation, with a strained liquidity position giving rise to a sizable escalation in accounts payable,” the statement said.
Fitch gives the territory an overall credit rating of ‘B’ which indicates that investment risk “varies noticeably,” one step up from “currently vulnerable.”