Guam goes from negative to positive in S&P’s eyes

S&P Global Ratings’ view of Guam’s bonds has shifted from negative to positive.

It gave a positive outlook to its BB-minus rating on Guam’s general obligation bonds, BB rating on Guam’s business privilege tax and section 30 revenue bonds, and B-plus rating on its appropriation-backed certificate of participation. The ratings action removes a negative CreditWatch placed on the bonds in November.

The positive outlook reflected what S&P said was a strengthening of the island government’s reserve position.

The island’s GO rating reflects the government’s improving fiscal position supported by favorable revenue and economic trends and an infusion of federal resources. However, the government’s credit “remains weighed down by its comparatively large overall debt and liability profile, which we anticipate will persist within the short-to-medium term,” S&P said.

Guam’s central government had about $1.2 billion in net-tax supported debt outstanding as of January 2024, according to Moody’s Ratings. It had a total of $4.77 billion in total liabilities as of Sept. 30, 2023, according to the government’s audited financial statement.

“This affirmation of our ratings is not only a validation of our transparent and accountable budgeting practices but also a promise to the people of Guam that we remain vigilant in managing our resources responsibly,” said acting Gov. Josh Tenorio. “Our focus will continue to be on strengthening our reserves and promoting sustainable economic growth so that we can effectively address both current challenges and future opportunities.”

Guam’s economy remains heavily reliant on military spending and tourism, S&P said. While military spending has been going up on the island and is expected to continue to increase, a federal reversal on this is possible. Tourism grew in 2024 12.6% from 2023 but was still 55.7% below that found in 2019.

The government’s general fund balance returned to positive territory for the first time in a decade in fiscal year 2023, S&P said. Total general fund balance of $195 million represented 20% of general fund revenue for the year.

Moody’s Ratings upgraded the government’s issuer rating, general obligation bonds, hotel occupancy tax bonds, and business privilege tax bonds to Baa3 from Ba1 and raised the COPs to Ba1 from Ba in January 2024.