The key drivers behind the rating action were:

• Policy differences with the Netherlands, the sole source of financing for Sint Maarten

• Untested access to alternative sources of financing, which exacerbates the credit impact of the large increase in Sint Maarten’s debt burden

The negative outlook reflects the risk that political differences with the Netherlands may lead to a repeat of the funding problems Sint Maarten faced at the end of last year.

The local currency ceiling is lowered to Baa2 from A3 and the foreign currency ceiling is lowered to Baa3 from Baa1. The three notch gap between the local currency ceiling and the sovereign rating reflects the limited role of the government in the economy. The one notch difference between the foreign and local current ceilings reflects the limited scope to impose transfer and convertibility controls within Sint Marteen’s existing monetary union.

RATINGS RATIONALE

RATIONALE FOR THE DOWNGRADE TO Ba2

POLICY DIFFERENCES WITH THE NETHERLANDS, THE SOLE SOURCE OF FINANCING FOR SINT MAARTEN