Fitch Rates Bermuda’s 2024 Global Bonds ‘AA-’

Fitch Ratings has assigned a long-term foreign currency rating of ‘AA-’ to the Bermuda Government’s $750 million global bond [4.854% coupon] maturing in 2024. The rating is in line with Bermuda’s long-term foreign currency Issuer Default Rating (IDR) of ‘AA-’ with a Negative Outlook.

The statement from Fitch said:

Bermuda’s ‘AA-’ ratings are supported by Bermuda’s wealth (the fourth-highest GDP per capita among Fitch-rated sovereigns) and its high savings rate relative to its ‘AA’ peers. Bermuda maintains its competitive advantage as a domicile for reinsurance and financial services companies due to its sophisticated legal system, strong regulatory framework, simple tax regime, proximity to the US and highly-skilled human capital.

Bermuda’s ratings are constrained by years of economic contraction, sustained high fiscal deficits, and increased government debt burden. The sovereign’s ability to sustain higher levels of debt is constrained by its narrow revenue base and its underdeveloped domestic public debt markets. Bermuda’s lack of economic diversification and excessive reliance on mature industries is limiting its growth prospects.

The Negative Outlook reflects continued uncertainty as to Bermuda’s fiscal and economic trajectory and the lack of a credible fiscal consolidation strategy.

RATING SENSITIVITIES

The rating on the aforementioned bonds would be sensitive to any changes in Bermuda’s Long-term foreign currency IDR.

Lack of a credible plan to consolidate public finances, continued deterioration in the sovereign’s fiscal metrics and weaker-than-expected economic growth could put downward pressure on the ratings. Regulatory changes that hurt international companies operating in Bermuda could also undermine creditworthiness.

Resumed economic growth and concrete signs of fiscal consolidation and debt stabilization could reverse the current Negative Outlook on Bermuda’s ratings.

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