AUSTIN (S&P Global Ratings) May 31, 2023--S&P Global Ratings today said that the damage and disruption resulting from Typhoon Mawar's recent landfall on Guam (BB-/Stable) could have negative credit implications for one or more of the ratings it maintains on various issuers on the island.
Typhoon Mawar made landfall on Guam on Wednesday, May 24, 2023, as a Category 4 storm, with the territory sustaining substantial damage from high winds, storm surge, and heavy rainfall. S&P Global Ratings maintains ratings on the Government of Guam and associated entities (see table).
While we continue assessing the situation on the island, we have stated in previous reports that a high-impact event such as the typhoon could lead to credit pressure on the territory's economy due to Guam's small size, isolated location, and significant reliance on tourism. We also believe the territory's finances could be pressured given historically low reserves in the general fund, which limit Guam's ability to replace lost revenues in the short term, recover quickly, and potentially fund initial clean-up and recovery efforts. Furthermore, this event could exacerbate lingering pressures from the pandemic and the potential for a prolonged recovery.
However, in the near term, the U.S. Navy and Coast Guard are assisting Guam with the recovery, and President Biden released a federal disaster declaration on May 26 that indicates some level of financial support by the Federal Emergency Management Agency (FEMA). Management also reports that more than 500 FEMA personnel are on the island to assist residents and the government with filing damage claims.
We are in contact with all Guam issuers that we rate to assess both short-term financial stability and long-term financial health. Key issues, from a credit perspective, include:
- The extent of the damage, including the projected impact on operating revenue through economic or service disruptions;
- Liquidity on hand to fund clean-up activities, meet upcoming debt service requirements, and fund regular operations;
- The need for short-term borrowing to fund recovery and restoration costs;
- Storm-related capital costs and anticipated sources of funding, such as internal liquidity, insurance, and federal sources;
- The likelihood and timing of FEMA support; and
- Initial response and pace of payouts from property and casualty insurers.
| Guam Entity Ratings | ||
|---|---|---|
| Obligor | Rating | Outlook |
| Guam Power Authority | BBB | Stable |
| Guam Waterworks Authority | A- | Stable |
| A B Won Pat Guam International Airport Authority | BB | Stable |
| Port Authority of Guam | A | Stable |
| Government of Guam (General Obligation) | BB- | Stable |
| Government of Guam (Certificates of Participation) | B+ | Stable |
| Guam Education Financing Foundation (Certificates of Participation (Compact Impact)) | BB | Stable |
| Government of Guam (Business Privilege Tax) | BB | Stable |
| Government of Guam (Limited Obligation (Section 30)) | BB | Stable |
This report does not constitute a rating action.
| Primary Credit Analysts: | Paul J Dyson, Austin + 1 (415) 371 5079; paul.dyson@spglobal.com |
| Ladunni M Okolo, Dallas + 1 (212) 438 1208; ladunni.okolo@spglobal.com | |
| Nora G Wittstruck, New York + (212) 438-8589; nora.wittstruck@spglobal.com | |
| Secondary Contacts: | Kevin R Archer, San Francisco + 1 (415) 3715031; Kevin.Archer@spglobal.com |
| Oscar Padilla, Dallas + 1 (214) 871 1405; oscar.padilla@spglobal.com | |
| Jenny Poree, San Francisco + 1 (415) 371 5044; jenny.poree@spglobal.com |
No content (including ratings, credit-related analyses and data, valuations, model, software, or other application or output therefrom) or any part thereof (Content) may be modified, reverse engineered, reproduced, or distributed in any form by any means, or stored in a database or retrieval system, without the prior written permission of Standard & Poor’s Financial Services LLC or its affiliates (collectively, S&P). The Content shall not be used for any unlawful or unauthorized purposes. S&P and any third-party providers, as well as their directors, officers, shareholders, employees, or agents (collectively S&P Parties) do not guarantee the accuracy, completeness, timeliness, or availability of the Content. S&P Parties are not responsible for any errors or omissions (negligent or otherwise), regardless of the cause, for the results obtained from the use of the Content, or for the security or maintenance of any data input by the user. The Content is provided on an “as is” basis. S&P PARTIES DISCLAIM ANY AND ALL EXPRESS OR IMPLIED WARRANTIES, INCLUDING, BUT NOT LIMITED TO, ANY WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE, FREEDOM FROM BUGS, SOFTWARE ERRORS OR DEFECTS, THAT THE CONTENT’S FUNCTIONING WILL BE UNINTERRUPTED, OR THAT THE CONTENT WILL OPERATE WITH ANY SOFTWARE OR HARDWARE CONFIGURATION. In no event shall S&P Parties be liable to any party for any direct, indirect, incidental, exemplary, compensatory, punitive, special or consequential damages, costs, expenses, legal fees, or losses (including, without limitation, lost income or lost profits and opportunity costs or losses caused by negligence) in connection with any use of the Content even if advised of the possibility of such damages.
Credit-related and other analyses, including ratings, and statements in the Content are statements of opinion as of the date they are expressed and not statements of fact. S&P’s opinions, analyses, and rating acknowledgment decisions (described below) are not recommendations to purchase, hold, or sell any securities or to make any investment decisions, and do not address the suitability of any security. S&P assumes no obligation to update the Content following publication in any form or format. The Content should not be relied on and is not a substitute for the skill, judgment, and experience of the user, its management, employees, advisors, and/or clients when making investment and other business decisions. S&P does not act as a fiduciary or an investment advisor except where registered as such. While S&P has obtained information from sources it believes to be reliable, S&P does not perform an audit and undertakes no duty of due diligence or independent verification of any information it receives. Rating-related publications may be published for a variety of reasons that are not necessarily dependent on action by rating committees, including, but not limited to, the publication of a periodic update on a credit rating and related analyses.
To the extent that regulatory authorities allow a rating agency to acknowledge in one jurisdiction a rating issued in another jurisdiction for certain regulatory purposes, S&P reserves the right to assign, withdraw, or suspend such acknowledgement at any time and in its sole discretion. S&P Parties disclaim any duty whatsoever arising out of the assignment, withdrawal, or suspension of an acknowledgment as well as any liability for any damage alleged to have been suffered on account thereof.
S&P keeps certain activities of its business units separate from each other in order to preserve the independence and objectivity of their respective activities. As a result, certain business units of S&P may have information that is not available to other S&P business units. S&P has established policies and procedures to maintain the confidentiality of certain nonpublic information received in connection with each analytical process.
S&P may receive compensation for its ratings and certain analyses, normally from issuers or underwriters of securities or from obligors. S&P reserves the right to disseminate its opinions and analyses. S&P's public ratings and analyses are made available on its Web sites, www.spglobal.com/ratings (free of charge), and www.ratingsdirect.com (subscription), and may be distributed through other means, including via S&P publications and third-party redistributors. Additional information about our ratings fees is available at www.spglobal.com/usratingsfees.