Moody’s re-affirms ASG’s bond rating at Ba3

Pago Pago, AMERICAN SAMOA — With a “stable outlook”, Moody's Investors Service has “affirmed” American Samoa's Ba3 issuer bond rating and also affirmed the Ba3 ratings on American Samoa's outstanding general revenue bonds, according to Moody’s in a rating-action notice issued June 30.

Additionally, American Samoa had $129.5 million of general revenue bonds outstanding at the end of fiscal 2022.

“The stable outlook reflects the territory's solid financial position and significant federal government support, which will enable the territory to weather economic swings that may occur in the next two years,” Moody’s said.

Moody’s gave a summary explanation behind its rating, saying that the Ba3 issuer rating reflects American Samoa's status as a US territory that receives generous operating and capital assistance from the federal government, which has enabled the government to maintain a solid financial position.

The rating also factors in the territory's small and volatile economy with employment concentrated in government and tuna packing; very low resident income levels; above-average long-term liabilities; and risks associated with operating a government-owned charter bank, according to the agency.

(Samoa News notes that the charter-bank referred to by the rating agency, is the Territorial Bank of American Samoa.)

Additionally, the rating reflects significant exposure to physical climate risks, namely sea level rise.

“American Samoa's Ba3 general revenue bond rating is the same as the territory's issuer rating given the government's pledge of its full faith and credit and broad revenue base to repay the bonds,” the rating notice states.

Moody’s explained that, the bonds are additionally secured by a pledge of specific revenue. As defined by the bond indenture, the pledged revenue comprises personal income taxes, corporate income taxes and certain excise taxes that include a tax on imported beer, malt extract, alcoholic beverages, motor vehicles and other items. The pledge of tax revenue is subject to the prior deduction of certain legislative earmark deductions.

Moody’s also listed factors that could lead to a downgrade of the ratings:

•           Weakening of financial position

•           Economic deterioration

•           Reduction of US federal government support

•           Significant increase of debt and pension liabilities

It’s unclear at this point what impact — if any — the bond rating will have in the near future with the delayed final audit of ASG in FY 2022 due to non-filing of the Territorial Bank of American Samoa financial audit of the same fiscal year.

Also unclear is the impact, if any, on the bond rating from two other areas:

1) The proposed new sanctuary to be established in the Pacific Remote Islands (PRI), which local leaders are saying if it does happen will affect StarKist Samoa’s ability to pack tuna thereby causing economic deterioration; and,

2) the increase of the government’s contribution to the ASG retirement fund (pension liabilities) that was enacted by statute — Approved by the Fono in the 37th Legislature and signed into law by the governor in April 2022, the law increases ASG’s contribution at 10% from Oct. 1, 2022 through Sept. 30, 2023; “12% from Oct. 1, 2023 to Sept. 30, 2024”; and 14% after Sept. 30, 2024. Funds for ASG’s contribution, according to a provision of the legislation, are to be provided for in the annual appropriations of ASG’s budget for the fiscal year in which the contributions are due.