Matching Fund Bonds Outlook Revised to Negative Amid Decline in Rum Excise Tax Revenues

The Matching Fund Special Purpose Securitization Corporation has seen its credit outlook revised from Stable to Negative, according to the latest surveillance report issued by Kroll Bond Rating Agency (KBRA). The adjustment reflects a persistent decline in pledged Matching Fund Receipts over the past three fiscal years, weakening coverage ratios and increasing concern over the territory's debt repayment capacity, according to an April 8 release issued by Kroll. The Matching Fund Securitization Bonds, rated BBB by KBRA, are backed by rum excise taxes remitted from the U.S. Treasury to the U.S. Virgin Islands. These funds have been transferred via a true sale to a bankruptcy-remote entity, the Matching Fund Special Purpose Securitization Corporation, formed under Virgin Islands Act No. 8540 in 2022. The rating agency considers the legal structure strong, with the sale mechanism and statutory lien helping to insulate bondholders from the broader credit risk of the Virgin Islands governme...