4 PHL entities receive further upgrades from S&P

By on May 11, 2014

The entrance of NAPOCOR: National Power Corporation. Wikipedia photo
The entrance of NAPOCOR: National Power Corporation. Wikipedia photo


MANILA (PNA) -– Standard & Poor’s (S&P) on Friday upgraded the ratings of three government-owned entities and a telecommunication company following the same decision on the country’s credit rating.

Ratings of the Power Sector Assets & Liabilities Management Corp. (PSALM) and National Power Corp. (Napocor) was upgraded to ‘BBB’ with stable outlook from ‘BBB-‘, their ASEAN regional scale to axA from axA-, and the senior unsecured debt also to ‘BBB’ from ‘BBB-.”

Rating of the Development Bank of the Philipines (DBP) was raised to ‘BBB’ with stable outlook from ‘BBB-‘, ASEAN regional scale to axA/axA-2 from axA-/axA-2; senior unsecured to ‘BBB’ from ‘BBB-‘, subordinated debt to ‘BBB-“ from ‘BB+’ and junior subordinated to ‘BB+’ from BB.

For Philippine Long Distance and Telephone (PLDT) company, raised was corporate credit lending to ‘BBB+’ with stable outlook from ‘BBB”, the ASEAN regional scale rating to axA+ from axA and the senior unsecured debt to ‘BBB+’ from ‘BBB’.

These were made after the debt watcher further upgraded the Philippines’ investment grade rating ‘BBB’ with stable outlook from ‘BBB-’, a year after it gave the country an investment grade rating.

The credit rating agency considers PSALM and Napocor’s stand-alone credit profiles as “weak and heavily dependent on the support of the Philippine government.”

However, it explained that it upgraded the entities’ ratings because on its opinion “both utilities are almost certain to receive timely and sufficient extraordinary government support in the event of financial distress.”

This assessment is based on the debt watcher’s analysis that both companies play a critical role in implementing government reforms in the power sector and providing missionary electrification in the country; and these benefit from an integral link with the government, which fully owns both utilities and has control over key budgetary and strategic decisions.

”The Philippine government also provides an irrevocable, unconditional, and timely guarantee on all debt obligations of PSALM and Napocor,” it noted.

Relatively, the debt ratings of DBP are in line with that of the country and S&P said the financial institution “plays a critical public policy role in supporting the economic and social development of the Philippines and has an integral link to the government.”

“Therefore, we see an “almost certain” likelihood that the government will provide timely and sufficient extraordinary support to DBP in the event of financial distress,” it said.

Ratings of PLDT, are still hindered by the debt watcher’s transfer and convertability assessment on the country although its stand-along credit profile is still at “a”.

”We believe PLDT benefits from its leading position in the domestic market, good business diversity, strong cash flows, and modest debt level,” S&P said.

It added that “intense competition in the mature domestic cellular market and large dividend payouts of almost 100 percent temper these strengths. (PNA) LAM/JS/UTB