1. Is there political will on the Island or in Congress to provide legislation similar to that of PROMESA in Puerto Rico?
  2. What is the security for Matching Fund Revenue Bonds ("MFR Bonds")? What is the Lock-Box Security Structure for MFR Bonds?
  3. What is the status of the expedited Matching Fund Revenue advance for FY 2017 and FY 2018?
  4. What is the FY 2018 debt service for MFR Bonds?
  5. Of the $223 million FY 2018 expedited rum payment, how much will go to USVI Treasury?
  6. While coverage on Matching Fund Bonds remains strong even through the third liens, in the event revenues are insufficient to meet the required subsidies to rum providers, can the whole structure be comprised through a termination of the agreement with rum producers?
  7. What is the total dollar amount of the subsidy payments?
  8. What is the security for the GVI Gross Receipts Taxes ("GRT") Bonds? What is the Lock-Box Security Structure for GRT Bonds?
  9. What is the status of FY 2018 Budget negotiations with the USVI Legislature?
  10. What is the most recent estimate of the Government's General Fund deficit, following receipt of federal CDLs?
  11. How does the Government expect to cover the remaining fiscal year 2018 deficit without market access?
  12. Are there certain expenditures that can be deferred? Layoffs? Has there been any potential for additional federal funds?
  13. There have been reports that the VI Government expects to provide the federal government with pari lien with senior matching fund bondholders, is there sufficient capacity under the additional bonds test to secure the full $250mn the Government is expected to receive?
  14. Does the Government have any plan to address the significantly underfunded pension system?
  15. For 2017, matching fund revenues were $203m. After $108m for debt service on MFBs and $68m for Diageo and Cruzan, the amount leftover to the general fund should be $27m. However, in the FY18 budget the 2017 estimate is $17.5. Could you please help explain the discrepancy?
  16. What is the value of the debt service reserve escrow account?

Is there political will on the Island or in Congress to provide legislation similar to that of PROMESA in Puerto Rico?

There is no plan or appetite for the USVI to implement legislation similar to Puerto Rico’s PROMESA.

What is the security for Matching Fund Revenue Bonds ("MFR Bonds")? What is the Lock-Box Security Structure for MFR Bonds?

MFR Bonds are secured by Matching Fund Revenues payable annually by the U.S. Department of Interior (“Department of Interior”) through the U.S. Treasury, which flow directly to The Bank of New York Mellon Trust Company, N.A., as Special Escrow Agent and Trustee, for deposit to the Pledged Revenue Account to pay debt service on the MFR Bonds.

To further secure the MFR Bonds, the Governor executed an irrevocable letter of instruction to the Department of Interior for the direct transfer of all Matching Fund Revenues directly to the MFR Trustee. The MFR Bonds are also secured by a statutory lien on all Matching Fund Revenues.

Each series of MFR Bonds are further secured by a fully funded Debt Service Reserve Account (12 months of principal and interest payable on all MFR Bonds).

What is the status of the expedited Matching Fund Revenue advance for FY 2017 and FY 2018?

On September 14, 2017, the expedited payment of the 2018 Matching Fund Revenue Advance was wired directly from the U.S. Treasury to The Bank of New York Mellon Trust Company, N.A., as Special Escrow Agent and MFR Trustee, in accordance with the terms of the Government’s statutory and legal obligations. The full amount required to pay the principal and interest on all MFR Bonds for fiscal year 2018 is on deposit with the Trustee for payment of all principal and interest on October 1, 2017 and April 1, 2018.

What is the FY 2018 debt service for MFR Bonds?

$85 million, exclusive of the Subordinated Revenue Bonds (Virgin Islands Matching Fund Loan Note - Diageo Project) Series 2009A and Subordinated Revenue Bonds (Virgin Islands Matching Fund Loan Note - Cruzan Project) Series 2009A.

Of the $223 million FY 2018 expedited rum payment, how much will go to USVI Treasury?

$20 million.

While coverage on Matching Fund Bonds remains strong even through the third liens, in the event revenues are insufficient to meet the required subsidies to rum providers, can the whole structure be comprised through a termination of the agreement with rum producers?

Termination of the contracts is never an option since all MFR bonds are secured by cover over revenues generated by the rum companies. Under the MFR Indentures and the contracts with the rum companies, debt service on senior, subordinate and third lien MFR bonds are paid first.  Only after satisfaction of all obligations to bondholders, are funds available to be paid to the Government and then to the rum companies.  Under each contract with the rum companies, in the event there are insufficient funds to pay the rum companies, the deficiency is carried forward and payable in future years.

What is the total dollar amount of the subsidy payments?

Based on the FY 2018 internal revenue matching fund advance to the Government, the following amounts were the portions for the rum companies:

  • Cruzan: $41,212,325
  • Diageo: $53,781,750

What is the security for the GVI Gross Receipts Taxes ("GRT") Bonds? What is the Lock-Box Security Structure for GRT Bonds?

The Government has a Lock-Box Security Structure for the payment of all USVI Gross Receipts Taxes ("GRT") Bonds.  There is a Special Escrow Agreement with The Bank of New York Mellon Trust Company, N.A., to provide for the daily deposit of all GRT Collections by the Government to the Special Escrow Account, held by the Trustee and maintained by FirstBank Puerto Rico, as the Collecting Agent. GRT Collections include all payments of Gross Receipts Taxes, together with all fines, interest, penalties and other charges assessed or otherwise payable.

The Special Escrow Agreement provides for the daily deposit of all Gross Receipts Taxes collected on the preceding Business Day, on behalf of the Government (subject to the first $250,000 of Gross Receipts Taxes to satisfy the Required Annual Moderate Income Housing Fund Deposit). Only after satisfaction of the Monthly Transfer Requirements are excess GRT Collections for such calendar month transferred to the Government for deposit into the USVI General Fund to be used for any lawful purpose.

As of September 14, 2017, the Monthly Transfer Requirement for all GRT Bonds and Notes has been fully funded and the full principal and interest payable on October 1, 2017 on all GRT Senior Bonds and Subordinated Notes is fully funded.

What is the status of FY 2018 Budget negotiations with the USVI Legislature?

The USVI Legislature suspended budget talks temporarily. Under Virgin Islands law, in the absence of a new budget for FY 2018, the appropriations for FY 2017, insofar as they are applicable, are automatically deemed re-appropriated, item by item, until approval of the 2018 Budget.

What is the most recent estimate of the Government's General Fund deficit, following receipt of federal CDLs?

At this time, the Government is unable to provide its deficit position with certainty.

How does the Government expect to cover the remaining fiscal year 2018 deficit without market access?

The $296 million Community Disaster Loan (“CDL”) approved for the USVI by Congress in 2017 is expected to provide sufficient funding to cover the shortfall in the Government’s operating revenues during FY 2018.

Are there certain expenditures that can be deferred? Layoffs? Has there been any potential for additional federal funds?

There are certain expenditures that can be deferred and layoffs must always be considered.  However, it is not currently anticipated that layoffs will occur, particularly, in light of the impact of the storms on private sector employment.  Government layoffs could further depress the economy.  In addition to the CDL, the federal government will be providing the Government with aid for infrastructure reconstruction which is anticipated to stimulate economic activity and revenues.

There have been reports that the VI Government expects to provide the federal government with pari lien with senior matching fund bondholders, is there sufficient capacity under the additional bonds test to secure the full $250mn the Government is expected to receive?

The Government issued an $85 million promissory note in January 2018 to the federal government as its initial borrowing under the up to $296 million CDL approved by Congress in 2017.  This $85 million promissory note was issued as a general obligation of the USVI.   The Government issued a second loan of $36 million in April 2018, also as a general obligation of the Government.  There is capacity to issue up to $175 million on a subordinate lien basis under the Government’s Matching Fund Revenue Indenture.  No Matching Fund Revenue (“MFR”) Bonds can be issued without full compliance with the requirements for issuance of Additional Bonds, including approval of the rum companies.

Does the Government have any plan to address the significantly underfunded pension system?

The Government is actively exploring options to address the underfunded pension system. No final solution has yet been identified but it continues to be a high priority of the Government.

For 2017, matching fund revenues were $203m. After $108m for debt service on MFBs and $68m for Diageo and Cruzan, the amount leftover to the general fund should be $27m. However, in the FY18 budget the 2017 estimate is $17.5. Could you please help explain the discrepancy?

After debt service payments, payments to Diageo and Cruzan, and the 3% contribution to the Community Facilities Trust account, the leftover amount is appropriated by the Legislature of the Virgin Islands to the General Fund and other governmental programs (i.e. Crisis Intervention Fund, St. Croix Capital Improvement Fund, GERS contribution, etc.).  On an annual basis, the Legislature of the Virgin Islands determines the appropriations to the General Fund or to such other governmental purposes from the cover-over revenues.

What is the value of the debt service reserve escrow account?

As of September 30, 2017, funds held in the Matching Fund Senior Lien and Subordinated Debt Service Reserve Account(s) totaled $135,722,102.

https://www.usvipfainvestorrelations.com/usvi-investor-relations-vi/view-file/i2880?mediaId=117046