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Hurricane Watch: Monitoring the Financial Impact on Governments in Florence's Path

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Hurricane Watch: Monitoring the Financial Impact on Governments in Florence's Path

Anticipating the path of a hurricane, gathering information on the damage, and then evaluating its potential credit implications can be challenging and the effects can vary widely, even within a relatively small geographic area. The 2018 hurricane season brings Florence to the Southeast, and it is predicted to make landfall in the U.S. over the Carolinas. S&P Global Ratings anticipates monitoring more than 50 local governments within North and South Carolina and we will likely expand the scope of our review to include Georgia given the recent track of the storm. S&P Global Ratings views the availability of federal grants and disaster assistance as a key component to stabilizing communities after a natural disaster, especially for areas with little-to-no support from private insurance.

Since issuers are focused on cleanup and post-storm assessment, it often takes them several weeks to connect with S&P Global Ratings and provide an assessment of damage, including any potential long- and short-term effects. As with our previous hurricane coverage, our first step is to triage the potentially affected issuers. During this time, we look at the most recent financial information available, particularly liquidity levels and upcoming debt service due dates, as well as any other reserves available to provide a cushion before state and federal aid arrives. Then, once the storm has passed, we begin contacting issuers and reaching out as they become available to communicate with us. Once we have assessed the potential effects on an issuer's credit quality, we take rating actions as necessary. In some instances, particularly when issuers remain unavailable for some time following a storm, we may place ratings on CreditWatch with negative implications or revise the outlook to negative. This would occur if the information we have indicates the presence of extreme or prolonged stress that we feel could affect overall credit quality.