Moody’s affirms Bermuda’s credit rating

Finance Minister Curtis Dickson has welcomed affirmation by international ratings agency Moody’s Investors Services of Bermuda’s A2 credit rating, with the outlook remaining stable, despite the island’s economy taking a battering from the global coronavirus pandemic..

Credit rating agency affirmed Bermuda’s outlook as stable.

“According to Moody’s, the key drivers for the rating affirmation are the government’s track record of fiscal consolidation which will support debt stabilisation after this year’s growth shock.

“Also, our debt metrics remaining in line with similarly rated peers, and our low susceptibility to event risks, reflecting Bermuda’s very strong external position and limited exposure to funding pressures were key,” said Dickson.

He said the stable outlook reflects Moody’s view that even though the global pandemic will have a negative effect on the economy, Bermuda’s “very high wealth levels and strong institutions, along with our ability to remain resilient in the face of severe economic stresses in the past, such as the global financial economic crisis, puts us in a good position of support once the coronavirus crisis subsides”.

Moody’s approved the island’s A2 issuer and A2 senior unsecured bond ratings.

Dickinson was pleased Moody’s had affirmed Bermuda’s A2 issuer rating and A2 senior unsecured bond ratings, as Standard & Poors, another international ratings agency,  had in April.

“These ratings actions serve as an independent endorsement of the actions we are taking to mitigate the impact of COVID-19,” he said.

“This government’s focus on fiscal consolidation, working collaboratively with all of our industry partners, and exploring feasible opportunities to bring us out of this pandemic in an even stronger position will even further strengthen and unify Bermuda.

“In turn this will translate into stronger economic growth which will further lead to an inclusive Bermuda with jobs and opportunities for all.”

Dickinson told the House of Assembly on Friday that the government has executed short-term loan facilities with local banks that will allow it to draw up to US$170 million in funds to help cope with the COVID-19 crisis.

Dickinson also told legislators the government plans to go back to the capital markets and refinance those loans with longer-term debt, while also taking out additional debt to fund its 2020-21 budget deficit.

The Finance Minister stressed that the government had not borrowed $170 million, but the facilities gave it the ability to borrow that much.

On March 23, the government executed a BMD$20 million one-year term loan facility agreement with Clarien Bank. The interest rate was set at four per cent.

On May 22, the government executed a US$150 million loan facility agreement jointly with HSBC Bank Bermuda and Clarien Bank, due to mature on September 17, 2020, priced at 3.75 per cent.

Dickinson, a former banker, said “it is encouraging that the two local financial institutions were supportive in providing government with its financing needs in these uncertain times.

“To date I can confirm that the government has drawn the full US$20 million from the Clarien facility and approximately $10 million from the $150 million joint facility. Currently, net debt stands at $2.71 billion, leaving the government with $189.6 million of borrowing capacity.”

The debt ceiling stands at US$2.9 billion and Dickinson last month projected a deficit of between $275 million and $315 million for the 2020-21 fiscal year.

“As soon as is practical, the government intends to refinance these short-term credit facilities by issuing long-term government debt in the global capital markets,” Dickinson told MPs.

The Bermuda dollar, which is not normally traded outside the island, is pegged to the US dollar at a one-to-one ratio. Both currencies circulate in Bermuda on an equal basis.