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Finance
June 8, 2009

Bond Rating Agency Maintains Province's Credit Rating

Newfoundland and Labrador's long- and short-term debt ratings have been maintained at A and R-1 (low) respectively by the Dominion Bond Rating Service (DBRS), one of three agencies who rate the province's credit worthiness.

The Honourable Jerome Kennedy, Minister of Finance and President of Treasury Board, said that given the world economic downturn and its impacts on the economy and fiscal position of the province, he is satisfied with the outcome of the results of the DBRS review. Minister Kennedy was pleased with the observation by DBRS that the fiscal discipline demonstrated by the Provincial Government, its strong liquidity position and efforts to reduce debt continue to provide solid support to the credit profile.

"The stability of the province's credit rating is a significant sign and a reason for cautious optimism, particularly during a global economic recession," said Minister Kennedy. "DBRS recognizes the efforts of our government over the last number of years in improving our fiscal position and significantly reducing our debt which has resulted in recognition of our current fiscal challenges as being temporary. Our government is committed to returning to a surplus by 2011 and we are optimistic about major projects such as the Long Harbour nickel processing facility, the Hebron project and White Rose expansion."

DBRS indicated that total revenues are expected to fall from the previous year due to the impact of lower commodity prices on royalty revenues and the absence of 2005 Atlantic Accord proceeds. The company also indicated that spending for key health and education programs will continue to grow, with a large portion of the spending increase used to address the latest round of public sector labour agreements.

Minister Kennedy affirmed that the Provincial Government will stay the course of fiscal discipline.

"We have reduced net debt by approximately 33 per cent over the last four years, and we will continue to do so in the future," said Minister Kennedy. "When we reduce debt we improve our credit rating and lower the cost of borrowing, when it is necessary. We are committed to improving our credit rating through fiscal discipline."

The credit rating of a province is one of the key factors in its ability to attract investors who may purchase provincial bonds. It is also a factor in the interest rate applicable to securities and used by all capital market participants in assessing the credit worthiness of a province.

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Media contact:
Tansy Mundon
Director of Communications
Department of Finance
709-729-6830, 685-2646
tansymundon@gov.nl.ca

2009 06 08                                9:40 a.m.


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