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|
|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;|
|Ladunni M Okolo, Dallas + 1 (212) 438 1208;|
|Nora G Wittstruck, New York + (212) 438-8589;|
|Secondary Contacts:||Kevin R Archer, San Francisco + 1 (415) 3715031;|
|Oscar Padilla, Dallas + 1 (214) 871 1405;|
|Jenny Poree, San Francisco + 1 (415) 371 5044;|
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