Standard & Poor’s Downgrades Bermuda Rating

December 29, 2011

[Updated w/Bob Richards comments] Premier and Finance Minister Paula Cox today [Dec. 29] announced international ratings agency Standard & Poor’s [S&P] has lowered its long-term sovereign rating on Bermuda from AA to AA-.

A statement released said, “The Ministry of Finance spoke with S&P today about this latest action and was advised that S&P has amended their ratings methodology such that the ratings of Bermuda and some of our key competitor jurisdictions have effectively received similar revisions.

“Earlier this year we saw S&P downgrade the United States, effectively creating a “new normal” for sovereign ratings.

“The Government is pleased that S&P has affirmed their stable outlook on Bermuda’s ratings. Bermuda’s short-term rating of A-1+ was also affirmed.

“Though Bermuda, like a number of other jurisdictions, has seen its ratings adjusted due to a revision in S&P’s rating methodology, the Government is pleased that the underlying fundamentals and strengths of our Bermuda economy have been recognised and that our outlook remains stable.”

In an overview of its decision to revise Bermuda’s rating, S&P said:

  • It considers monetary flexibility and gaps in official data as credit weaknesses for Bermuda.
  • The ratings continue to be supported by Bermuda’s comparative advantages in the reinsurance sector, its political stability, its prosperity, and its strong Government balance sheet.
  •  The stable outlook reflects the balance of risks between Bermuda’s fiscal flexibility and its external vulnerabilities–most notably to potential changes in US law affecting the offshore reinsurance industry–and the health of Bermuda’s primarily locally operating banks

The report is below, click ‘Fullscreen’ for greater clarity:

Update 7.00pm: Shadow Finance Minister Bob Richards said, ” In my remarks on the Throne Speech in November, I said the following:

“We would, obviously, not like to see a downgrade, but recognize that the risks of a rating downgrade have significantly increased since last year.”

“No amount of Government spin doctoring can change the fact that this was fairly inevitable in view of the deteriorating fiscal conditions of the Government. A downgrade is a downgrade.

“There is no mention of the “new normal” in the Standard & Poor’s report on Bermuda. This is a vain attempt by the Premier/Finance Minister to gloss over the meaning of the downgrade.

“The S&P downgrade of the United States resulted in lower borrowing costs for that government. In other words, the markets rejected S&P’s downgrade. It will be interesting to see whether that happens to Bermuda. We think it very unlikely; indeed, we believe it is highly likely that our future borrowing costs on the Government’s debt will increase because of this downgrade.

“Our public debt is already increasing by about one million dollars for each business day of the year. The interest payments on our debt are already costing us about $200,000 a day. The “we’re alright Jack” attitude of this Government towards public debt is a big difference between the PLP and the OBA.

“This is a serious situation. It is the first time Bermuda’s rating has been changed since we got our AA rating in the early 1990s.

“For the Government to blow it off as the “new normal” says they still don’t get it. All Bermuda should be concerned about that. We are drifting toward the rocks and need to change course. Bermuda needs steadier hands on the wheel.”

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  1. You can't be serious says:

    S&P take no prisoners. Downgrade is a bit harsh, but everyone from USA, Isle of Man, Guersey, the Bahamas, and sll of Europe are on Credit watch.

    At least our outlook is stable and our short term ratings and our currency is still rated AAA.

    • Mike says:

      Outlook is stable?

      Death is stable too.

      • Who is OBA? says:

        The truth is looking YOU the opposition in the face and you still want to spin our stable outlook! Get with it!

        • huh? says:

          And aren’t you spinning the downgrade with the focus on the outlook?

          • Yup says:

            Bermuda is going down. But blacks will go down with their own before not voting for PLP. PLP now. PLP forever. Hello Jamaica!!!!!

          • sticky says:

            damn what a racist point of view.

  2. Hmmmmm says:

    Watch this space. All of those who told us that credit ratings and these things mean little or nothing will be falling ovber themselves to cast this in the most negative light. Betcha…..(cue OBA statement- stage right)

    • Tired of nonsense says:


      Problem is a downgrade results in higher borrowing costs. Something the Govt or Bdians can afford at this point in time.

      • Yup says:

        By the time PLP supporters realize the jig is up, it will be toooooo late. Bermuda is heading down. Go PLP. Good bye Bermuda!!!

    • interesting says:

      LMAO, I can see it now…… Ratings don’t mean anything, Oh i lied they do mean something.

      This is mixed news, but we seem to be holdibng up pretty good through the storm. Jobs are a lagging indicator, but i’m guessing there may be some GDP growth next year which may provide a few more jobs.

      That or another huge natural disaster should do the trick.

    • Justin says:

      I disagree. What this has essentially done is prove what the OBA and Bob Richards have been saying all along – Bermuda and Bermudians have been/are actually suffering a lot more than what ‘official’ gov’t statistics show and what the rating agencies have been saying all along. My opinion is that rating agencies are finally seeing things for what they are and they are closer to being right than one year ago.

      Here’s the test for everyone: If issued a bond how many people would invest in it if it even if it offered a slightly higher interest rate compared to US Treasury Notes? My guess is that most people would opt for the US bonds…

      • Justin says:

        *If Bermuda issued a bond…

      • interesting says:

        So the OBA and Bob Richards now blame the PLP Government for S&P revising their methodology and lowering ratings for Bermuda, Isle of Man, and Guernsey based upon a “sovereign’s own monetary flexibility”..

        That’s a stretch man, but as expected let the stretching begin.

        • Justin says:

          Yes, I’m blaming the PLP gov’t for the rating decline. Why? In short because the PLP racked up a huge amount of debt in the good times and now in the bad times we don’t have a nest. Bermuda had the potential to be the envy of the world, but instead we allowed a single man to ruin that and we will be suffering for years with higher taxes and less services.

          The next budget should be interesting. Will Paula decide to balance the budget, or borrow more money and kick the problem down the road again only to be revisited at a later time? Let me know what you think when you’re paying higher taxes and taking home less money this time next year, mate!

          • interesting says:

            You are Delusional.. They wasn’t racked up in good times idiot, it was racked up in BAD times.. 2008 to now. Stop making up history please!

            Would you have preferred for the governement not to borrow and seen our economy collapse? Not even Bob Richards would have advocated that, and yes Bob Richards would have borrowed money too, so get your facts correct… mate!

            • Justin says:

              Want to know how I know you know that you’re losing this argument? Because you are resorting to name calling and false information. FACT: During the Ewart Brown years Bermuda’s debt increased at the highest rate in history. Moreover, I believe about 75% of Bermuda’s national debt was acquired during his tenure. Larry Burchall has a beautiful chart that illustrates this, and he should post it right here again for you so that you can see.

              Yes, in bad times it is good for governments to spend money to stimulate the economy. The reality is that gov’t was spending far too much money in the good times and didn’t save any money for the bad times, and somehow in that time they were still acquiring debt even though our revenues were actually increasing. Hard to understand, but it’s true. Now the gov’t is in a situation where they have no ‘savings’ and their credit card is probably just about maxed out so they have no money to stimulate the economy. Why do you think they’re talking about rolling back some of their policies such as free day car or free car licensing for seniors? I don’t know about you, but my parents always told me to save for a rainy day. Well the rainy day is here but obviously the PLP gov’t didn’t listen very well, did they?

            • Rick Rock says:

              Enourmous debt was racked by Ewart Brown, which meant the government put itself in a position of no financial flexibility when the US went into recession. During the Brown years whenever someone (the opposition) said that we should prepare for recession, the PLP government came on the news and said the opposition was “making mischief” and “didn’t understand that Bermuda is different”.

              In other words they stuck their heads in the sand.

              And S&P’s downgrade is because of that exact issue; it is that Bermuda has little financial flexibility. In other words, the government has few options in how it can raise money or control debt.

              There is no doubt that it would had been useful if the PLP had conserved resources rather than spending like drunken sailors. In fact our position now would have been completely different.

      • S&P is clueless says:

        A “slightly higher rate”? Try 400+ basis points. I would hate to see what kind of rate Bermuda would have to offer on any new issue…

  3. Terry says:

    Are you serious?

  4. interesting says:

    I’m surprised Bermuda was able to keep a stable outlook when stuff seems to be heading downhill here and around the world. Fitch confirms Bermuda’s ratings and S&P says the outlook is stable and talks about our Strong economy. I guess things aren’t as bad as Bob Richards would like us to beleive……..

  5. Tired of nonsense says:

    Can Bernews elaborate on what S&P are referring to when stating “gaps in official data” as being a weakness?

    • Justin says:

      Here’s a quote from the actual document that should answer your question. Where is PATI?

      “Our political profile assessment also incorporates our view that public sector transparency (measured by indicators such as the timeliness, frequency, and completeness of statistics and public sector financial reporting) trails that of many higher rated governments.”

    • Bernews says:

      @Tired of Nonsense, page 3 of the report mentions “the lack of a recent official estimate of Bermuda’s international investment position represents a material data gap.”

      We asked the Finance Ministry to comment on the “gaps in official data” statement from S&P and they said, “The Government remains committed to fiscal consolidation to bolster business confidence and support economic growth.

      “There are also a number of initiatives in progress as outlined in the Pre-Budget Report to increase budget transparency to ensure Bermuda meets international standards in this area.

      “Additionally, the Government plans to begin releasing quarterly GDP statistics next year; this will bring us into line with other similarly rated jurisdictions.”

      • Moojun says:

        So to sum up the Government’s pre-budget report (as referred to in their response to your question); The Government is thinking about maybe meeting to discuss appointing someone to look into considering forming a Committee that could possibly identify a pallatable solution… next year… possibly.

        Nice one! Here are a few suggested continuations of the meaningless statements in their response:

        1 – ‘The Governemnt remains committed to fiscal consolidation’… but currently finds itself short of available funds to pursue this commitment as thoroughly as it probably should.

        2 – ‘There are also a number of initiatives in progress’… just as there is an initiative to find the cure for cancer, but it is still many, many, many decades off.

        3 – ‘the Government plans to begin releasing quarterly GDP statistics next year’… just as most of us plan to lose some weight and start exercising next year. Even if it happens, I think we all know how obfuscating statistics can be. Each quarter the tourism statistics are spun into a glowing report supporting how this is the continuing ‘Platinum Era’ of Bermuda tourism.


  6. Justin says:

    You can already see how they are spinning this as Bermuda suffering from a global financial crisis, but as Bob Richards has already proven, this is indeed a “made in Bermuda problem”. One thing they can’t spin is that our debt increased exponentially over the Brown years while the current premier allowed it to happen right in front of her eyes.

    • OMG says:

      Oh I can hear it now – “we have put in place good governance to take care of this” BS!!!!
      The Cog in the Wheel needs to get the rest of the wheel in order to get us out of this mess!!!!

      • interesting says:

        What mess?

        You mean the mess that S&P Refers to as: “The ratings continue to be supported by Bermuda’s comparative advantages in the reinsurance sector, its political stability, its prosperity, and its strong government balance sheet.”

        Or this mess: “We also view Bermuda’s economy, with one of the highest per capita income levels in the world and with a leading position in the global reinsurance sector, as very strong.”

        or this mess: “Our “very strong” political and economic profile appraisal rests on our view of Bermuda’s effective and predictable policymaking and its stable political institutions. Together, they have helped this the largest British Overseas Territory to deliver solid economic growth in the past (real GDP growth averaged 3.4% per year during 1997-2007) and to manage the recent recession (with timely, targeted, and temporary stimulus and deft intervention to support Bank of N.T. Butterfield & Son, Ltd. (BNTB), Bermuda’s second-largest bank, at minimal direct cost to itself).”

        • Justin says:

          “The ratings continue to be supported by Bermuda’s comparative advantages in the reinsurance sector, its political stability, its prosperity, and its strong government balance sheet.”

          We all know that other jurisdictions are are becoming more competitive and we are already experiencing jobs being exported from Bermuda to other jurisdictions. What’s your point?

          We also view Bermuda’s economy, with one of the highest per capita income levels in the world and with a leading position in the global reinsurance sector, as very strong.”

          Again, jobs in IB are shrinking so how long will this last for? Remember, if Bermuda’s population was only two people and one person made $100k a year and the other made $10k a year our average per capita income would be $55k. Just saying…

          “Our “very strong” political and economic profile appraisal rests on our view of Bermuda’s effective and predictable policymaking and its stable political institutions. Together, they have helped this the largest British Overseas Territory to deliver solid economic growth in the past (real GDP growth averaged 3.4% per year during 1997-2007) and to manage the recent recession (with timely, targeted, and temporary stimulus and deft intervention to support Bank of N.T. Butterfield & Son, Ltd. (BNTB), Bermuda’s second-largest bank, at minimal direct cost to itself).”

          S&P is talking about the PAST in which a UBP blueprint afforded that growth. What is the PLP doing NOW to ensure growth and prosperity for all Bermudians in the FUTURE?

        • S&P is clueless says:

          When you read that, do you really believe that the analyst at S&P has a clue what Bermuda is all about? Other than a strong reinsurance sector, the rest is ridiculous…

    • Who is OBA? says:

      The debt increased under a premier who gots things done! And yah go on about your allegations of stealing and bs! You know how many presidents including fiscal conservative president increased the debt in the United States! Please do blame the Bermuda Government for changing the S&P methodology! LOl it is the Bermudian Gov. that should be at blame for the new financial normal lol lol…Bob and OBA is full of hot air! Bring back the UBP like please!

      • Justin says:

        Keep drinking the Kool-Aid my friend. Talking about the new financial normal, get used to paying higher taxes and receiving less services because that will be the new normal. When you become frustrated just think of the man that ‘got things done’. LOL

      • Rick Rock says:

        Oh yeah, Ewart “got things done” alright.

        He got the ferries that are now falling to pieces. The “fast” ferries who’s speed we now limit in order to save fuel costs.

        He got Beyonce. We spent $3m that year on the music festival that attracted about 50 tourists. That $3m could have paid for a few policemen or teachers now.

        He spent – what – $100m? – on overseas consultants that did nothing at all. Certainly didn’t bring a single tourist here or create a single job, other than for certain “privileged” contractors…

        He got a nice retirement, a boat in the Caribbean, a nice savings account.

        Oh yeah, he’s also a stellar reputation for honesty and openness. I nearly forgot that.

        He got the Debt from its historical norm to over $1bn. And here we are with the resulting action from S&P. Do you think for a minute S&P would have downgraded the debt if it had still been $150m?

        By the way. Don’t be fooled by the “revised rating methodology”. That isn’t an excuse. It’s a REASON. In other words, S&P is now recognizing that Bermuda’s economy is significantly riskier than it previously recognized. Things are much worse than we have previously been told, folks, and this proves it.

        Also, don’t be fooled by the “stable” outlook. That doesn’t mean the economy is “stable”; it just means they aren’t thinking about ANOTHER downgrade in the immediate future. It doesn’t mean anything else.

  7. Chill Pill says:

    No one panic. S&P, as brutal as they are, downgraded all countries. We are just one of many. Companies still come to this lovely island of ours and will continue to utilize out tax haven benefits!

  8. Justin says:

    Here’s another quote from the S&P Review:

    “The outlook on Bermuda is stable. The ratings could come under downward pressure if our favorable assessment of policymaking changed, perhaps in the face of the increased fiscal challenges from what we forecast to be a three-to-four-year period of low-to-negative economic growth.”

    But wait, didn’t Paula Cox say we are post-recession?! I guess she really doesn’t have a clue, does she?

  9. Justin says:

    I commend Bernews for actually posting the entire document on their site. The beauty of this is that the PLP can’t say the media spins things when the official document is there for everyone to see. Does anyone even know if the gov’t even uploads these sort of documents on their own website? My gut feeling is that they don’t.

  10. Verbal Kint says:

    This government is essentially bankrupt. We just wait for the other shoe to drop. Ratings fall, interest rises and the cycle begins which is bringing down so many national economies. Bermuda does not have the resources to stop this downward spiral. Those resources were unwisely spent, and they are irretrievably gone.

    • Justin says:

      The sad part is that Paula Cox has already publicly said she has no apologies for it.

    • Vote for Me says:

      @ Verbal – not so fast. Bermuda (and by extension this government) is not bankrupt. The reality is that we need to work together for the collective good of Bermuda. Whilst we accept the political environment, we need to separate ‘political non speak’ from facts and move forward. We owe it to our children and grandchildren.

      • blankman says:

        Bermuda is over a billion dollars in debt (six billion if you add in the pension funds and a few other odds and ends).

  11. Vote for Me says:

    No need for spin. The reality is that S&P have stated that a change in their metodology has resulted in a revision of Bermuda’s ratings. The result is a reduction for Bermuda and several of our competitors.

    What is important for readers is to note that ratings agencies play a critical financial role since their ratings are considered by potential lenders when they decide whether or not to lend to countries or institutions. I note one of the earlier posts in terms of what would happen if Bermuda wanted to issue debt in the near future. Based on the significant over subscription of our recent borrowing, the reality is that borrowers would again be happy to lend to Bermuda since our credit rating and financial standing remains strong.

    To add a political slant, it will be interesting to see how the OBA / Bob Richards comments because they previously indicated that the ratings agencies ‘had it wrong originally’. How many guesses that they will now miraculously state that the ratings agencies have had an epiphany and are now completely correct.

    On a more serious note, we need to stop the political rhetoric and get Bermuda on a firm financial footing in the midst of world econmic challenges. Why?? Because we are in the same economic boat and unless you have a mortgage free house and substantial cash in the bank, we will all sink or rise together. Selling a house in the current market is a no starter. Let us not cut off our collective noses to spite our collective faces.

    I say bring on the election, let us see who wins and then buckle down together for the good of the country.

    • Justin says:

      You’ve missed the entire point regarding the hypothetical example of Bermuda issuing debt. Given Bermuda’s credit rating is one notch below the US’s, about how much more would our interest have to be in order for people to subscribe to the bond? If you say only slightly higher I would say you are dead wrong. That is why Bermuda cannot be placed in the same basket as the US, Italy or even Greece for that matter.

    • Rick Rock says:

      The ‘change in methodology’ is not an excuse. What has happened is that S&P is finally recognizing that the Bermuda government has little financial flexibility. Bermuda has few options in how it can raise finances and manage debt. That, along with the information gaps, leads to the downgrade. So, finally, S&P is starting to signal concern about Bermuda’s economy. It’s serious issue, and it’s very concerning that the government (and it’s blinded supporters) are brushing this off as a non-event.

      More heads in the sand.

      The issue on debt is not whether we could issue some. We know the government is going to issue more debt, because spending has not been reigned in, and the tax base is dwindling. The real question is: what will be the interest rate?

      Bear in mind that Italy has been issuing debt at about 7%, about the absolute limit that is sustainable by that country. Paying 5-7% for government issued debt is equivalent of using your Mastercard to buy a house.

  12. The DOCTOR says:

    I wish that Madame Cox would stop worrying about all the other jurisdictions and concentrate on Bermuda and getting the International Business sector back to what it was and even more so the Tourism sector before there is nothing left to offer.

  13. S Brown says:

    Iol looking at the comments posted under this article, then looking at the comments under this article:

    is very telling about some of the people who blog on this site.

    that is all

    • Rick Rock says:

      I said in the article about Fitch that rating agencies often appear to be the “last to know” about a problem; and this is more evidence of that. S&P is not downgrading because of more bad news: it’s (FINALLY) starting to recognize a problem that has been evident to many of us for some time.

      You can’t have it both ways either, by the way. If Fitch was unquestionably right is saying all was well, then S&P must unquestionably have it right when it says things are getting worse.

      • Shaking the Head says:

        So now the rating agencies are good, when just the other day they were bad as they were a major part of what caused the Global Recession. The major concern should be they are basing their rating on historical information, and the information or lack of information fed by the PLP Government. That is clearly stated in their Report. Since the information provided was only up to 2007, then Bermuda really is in trouble.

  14. truth says:

    thanks PLP

  15. The Report Reads says:

    · The ratings continue to be supported by Bermuda’s comparative advantages
    in the reinsurance sector, its political stability, its prosperity, and
    its strong government balance sheet.

    · The stable outlook reflects the balance of risks between Bermuda’s fiscal
    flexibility and its external vulnerabilities–most notably to potential
    changes in U.S. law affecting the offshore reinsurance industry–and the
    health of Bermuda’s primarily locally operating banks.

    I guess its still the PLP’s fault Right!

  16. Boom says:

    I’d like to know if this triggered a colateral posting. If so how much and in what form are we posting it.

  17. verbal kint says:

    @ Vote for me. I said essentially bankrupt. What assets does this economy have other than dwindling International Business. What does the Island produce? The largest employer is the government. I agree that people need to work together, but the majority are too tied up in their own political feelings to make that happen. I hope for the best, but I am not optomistic, and a change in government is probably not going to be sufficient help. The resources needed to fight this economic situation have been spent and are never coming back. A blind eye turned to that reality has left a future, for our children and grandchildren, of crushing debt amidst dwindling resources. It is past time for this government, or the next, to stop talking and start acting to stem profligate spending, and to insure fiscal responsibility. Time for talk is long since over.

  18. verbal kint says:

    One further thought. The move to waive the 60/40 rule is a desperation play to sell off the Island’s assets to foreigners to bring about short term relief. This is shortsighted. When it has all been sold, Bermuda for Bermudians will, sadly, become a pipedream.

    • sandgrownan says:

      We don’t have that luxury. Bermudians have created this problem, they need to and will live with the consequences.

  19. Friendly Faces says:

    Terrible day for Bob and Paula, cooking the books to s+p after talking transparency and an alternative to Brown.

    And now we’ve got an armed gang robbing daily, to go with our gang problem which is apparently the fault of the British according to our idiot, hang on IDIOT, security minister or whatever Perinchief is.

    We’re in a mess people, and the only thing left is the Reinsurance Industry, which is apparently our biggest enemy.

    But we will take us down won’t we, because as Kim Swan says people vote on racial lines, meaning we only elect the PLP, who have as Paula said balanced things – now we are all miderable with no prospects.

    If you defend the PLP on this forum, hang your head in shame, you are not Bermudian, you are blind and stupid. God I’m angry, what has become of us?

    • wotless says:

      I’m not angry, and won’t hang my head…. sorry you feel that way dude.

      • sandgrownan says:

        I’m furious.

        I also know that the PLP will be re-elected.

        • Fish face says:

          Yeh man,I’m with you and friendly faces. We continue to elect a black govt even though they are patently not up to the job. Ive had enough too, I’m moving to new york in feb, no job, no prospects.

      • Fish face says:

        No, dont be so ambivalent. I feel sorry for you , ARE YOU SERIOUSLY defending the plp. What will it take to elect a party on performance, not skin colour, tell me please? I am a black 25 year old woman. and I am so disappointed with my own.

  20. navin johnson says:

    I am with you 100% Friendly Faces and am at the point where I am no longer shocked that Government would be celebrating a ratings downgrade….Hey we now have the same rating as Spain isn’t that wonderful? we are doing really well and there is no cause for concern at all …keep in mind that rating agencies tend to be masters of the understatement and euphemism so that when S&P mentions lags in information they are really saying that Governments data is better than the BIU as far as timeliness.

  21. Eyes wide open says:

    Keeping PLP in power is like giving your drunk friend keys to drive because he insists he’s ok. And this is coming from someone who voted for them the last two elections.

  22. James says:

    Watch out Greece, here we come…but nobody is going to bail us out.

  23. Rick Rock says:

    How are things going with the space business? You remember, the “Third Leg” of the economy?