The financial situation in the U.S. Virgin Islands is beginning to mirror what happened in Puerto Rico as the power agency is contending with a financial squeeze, Bloomberg News reported. The uncertainty led Moody’s Investors Service on Sept. 23 to downgrade the most senior Virgin Islands Water and Power Authority (WAPA) bonds to eight steps below investment grade, indicating a high likelihood of default. Subordinate debt due in 2031 last traded at an average of 92 cents on the dollar, above the 65 percent to 80 percent recovery that Moody’s rating suggests investors are likely to receive. The risk of default has increased due to WAPA’s “unsustainable capital structure with very tight liquidity, high debt load including a substantial unfunded pension liability, the increased frequency of power outages, reducing the reliability of the electric system, high electric rates, and chronic challenges facing the economy,” Moody’s said in a report. Governor Albert Bryan Jr. says the government is “steadfast” in making sure that the utility’s bills are paid. But the territory’s Congressional representative says its debt may need to be restructured, clouding the outlook for investors who own $227 million of the authority’s bonds.
