Guam GOs upgraded to BB by S&P

The government of Guam's general obligation rating was upgraded to BB from BB-minus by S&P Global Ratings, which cited improved operating performance.

S&P also raised the government's business privilege tax and section 30 revenue bonds to BB-plus from BB and its rating on the government's appropriation-backed certificates of participation to BB-minus from B-plus. It has a positive outlook on the ratings.

S&P cited favorable revenue and economic trends and a steady infusion of federal resources. The governor's fiscal 2027 budget proposal "emphasizes the continued need to achieve structural budgetary balance by using current receipts with budgeted expenditures and shifting away from the practice of appropriating the preceding fiscal year's surplus to support current fiscal year expenses," the rating agency said in a note.

"This is welcome news but not a surprise," said Guam Gov. Lourdes Leon Guerrero. "We have laid the groundwork for recovery in a deliberate, methodical manner taking into account the 21st century pivot that is underway in our local economy. While objective financial experts ? determine Guam's financial footing has improved, we still have more work ahead of us to protect that progress for our families, our businesses, the investors who believe in Guam and our future."

On a generally accepted accounting principles basis Guam's unassigned general fund balance became positive for the first time in at least a decade at the end of fiscal year 2023, with a balance of $29 million, S&P noted. It grew to $45.5 million on Sept. 30, 2024, on an unaudited basis.

Guam's rainy-day fund grew to $87.7 million in the current fiscal year from $42.6 million in fiscal 2023.

S&P cited Guam's vulnerability to exogenous shocks and significantly elevated debt and liability profile as credit weaknesses. It said the government has low, albeit growing, financial reserves.

The government benefits from "credit-supportive budgeting practices and policies," S&P said.

Guam is exposed to physical risk due to exposure to rising sea levels and adverse weather events, such as typhoons, the agency added.

S&P estimates Guam had $1.02 billion in net direct debt as of Sept. 30, 2024, equivalent to $6,626 per capita. The government had $905 million in net pension liabilities as of Sept. 30, 2023.

Moody's Ratings rates Guam's GO and business privilege tax bonds Baa3 with a stable outlook.