State of the Tribe: 2nd Quarter, 2018

Chairman of the Southern Ute Indian Tribe, Christine Sage
McKayla Lee | SUDRUM

By Christine Sage

Chairman, Southern Ute Indian Tribe

In 2001, Fitch Ratings awarded the Southern Ute Indian Tribe its first AAA rating. At that time, no Native American Tribe had ever been granted a ‘AAA’ rating. On June 4, 2018, the Southern Ute Indian Tribe received news Fitch Ratings again affirmed the ‘AAA’ rating.

A credit rating is an assessment of credit risk to determine the ability to meet certain debt obligations. These ratings are assigned primarily by three companies, Standard and Poor’s (S&P), Fitch Ratings (Fitch), and Moody’s Investor Services (Moody’s), that exist for the purpose of trying to determine how safe or risky it would be to acquire the bond of a government, company, or agency. Investors cannot possibly do research on every corporation, local, and state governments whose bonds they might purchase, and so they use the credit rating agencies as a way to determine how risky one particular entity is.

Why is this rating important?

There are two reasons the Tribe’s credit rating is important. The first is similar to an individual’s personal credit. Borrowers who have a better credit rating will pay lower interest rates. The Tribe can borrow at extremely low rates, which allows the Tribe to better manage its assets and fund long-term projects like the Cedar Point Housing Initiative. Today, if the Tribe’s credit rating were to drop below a ‘AAA’ rating, the interest rate on its current bonds goes up and would require the Tribe to incur additional interest expense.

The second reason the Tribe’s credit rating matters is that a ‘AAA’ rating proves that the Tribe is operated effectively and responsibly in terms of long-term financial planning. This rating also indicated that the Tribe has the ability to meet its commitments even with unforeseeable events.

What is the requirement to achieve this rating?

The three companies, S&P, Fitch, and Moody’s, disclose the elements that are considered in evaluating an organizations credit, and the ratings are based upon proprietary analytical models, assumptions and expectations of the agency. Essentially, a ‘AAA’ rating means that the Tribe has financial resources well in excess of any debt, creating strong reassurance that all loans taken out by the Tribe will be repaid on time and in full. Fitch ‘AAA’ rating denotes the highest credit quality and the lowest expectation of default risk. They are assigned only in cases of exceptionally strong capacity for payment of financial commitments. This capacity is highly unlikely to be adversely affected by unforeseeable event.

Why is this rating unique for a government to receive?

The Southern Ute Indian Tribe was the first tribal entity to receive a ‘AAA’ rating. Earning a ‘AAA’ rating requires a combination of deep financial resources, transparency, and a long-term track record of responsible governance. Keeping that rating requires discipline to stay the course.

Like it? Share it!

Facebooktwittergoogle_plusredditpinterestlinkedinmail