[ISL] "More in Debt Than Puerto Rico, the Virgin Islands Rejects Rescue"

[rfmcdonald]

Bloomberg's Brian Chappatta reports on the impending financial apocalypse in the US Virgin Islands, one that seems likely to impact Puerto Rico's efforts to find a viable solution to its issues.

Congress’s plan to throw a lifeline to Puerto Rico is making waves in the U.S. Virgin Islands.

The measure that passed a House committee last week would allow for a federal control board to oversee the finances -- and potentially restructure the debt -- of any U.S. territory, even though Puerto Rico is the only one now asking for help. Virgin Islands Governor Kenneth Mapp and Rep. Stacey Plaskett have blasted the bill, warning that it may tarnish its standing with investors. That concern is already starting to materialize: Returns on its securities are trailing the $3.7 trillion municipal market for the first time since 2011.

The Caribbean island, Puerto Rico’s closest American neighbor, has a sliver of the population -- about 104,300 -- and a fraction of the debt, with $2.4 billion across all issuers. But divvied up, that’s $23,000 of obligations per person, even more than Puerto Rico’s $20,000. The two Caribbean territories with a shared culture also have similar fiscal strains: declining populations, underfunded pensions, histories of borrowing to cover budget shortfalls and unemployment rates that are twice as high as the U.S. mainland’s.

“It’s the same template: Over a period of years, you keep issuing debt to cover your operating deficits, your economy isn’t growing, your population isn’t growing, but your liabilities keep growing,” said David Ashley, an associate portfolio manager at Thornburg Investment Management, which holds $11.5 billion in municipal bonds. “Just by virtue of math, your per-capita debt just continues to rise, probably to an unsustainable level at a certain point.”