PH bonds get highest grade


The country’s planned 10-year denominated global bonds issuance got an investment grade rating from debt watcher Fitch Ratings.

In a statement, Fitch said that it has assigned Philippines’ forthcoming US dollar-denominated global bonds due on 2024 an expected rating of “BBB-[EXP].”

“The final rating is contingent on the receipt of final documentation conforming to information already received.

The expected rating is in line with Philippines’ Long-Term Foreign Currency Issuer Default Rating [IDR] of ‘BBB-’/Stable. The sovereign’s Long-Term Local Currency IDR is ‘BBB’/Stable,” it stated.

Part of the proceeds from the bond issuance is intended for liability management purposes with the aim to accumulate net present value (NPV) and annual coupon payment savings, as well as to lengthen the average maturity profile, the debt watcher said.

Furhermore, Fitch said that the Philippines’ “BBB-“ IDR reflects key rating drivers such as strong external balance sheet, gross domestic product (GDP) growth, fiscal management and structural weaknesses.

“The sovereign external balance sheet is strong relative to peers. A persistent current account surplus, underpinned by remittance inflows, has led to the emergence of a net external creditor position in 2009,” it said.

The debt watcher noted that the country’s strong external balance sheet resulted to less under pressured Philippine asset markets, amid market expectations on the US central bank’s unwinding of its quantitative easing program.

It also said that the country’s GDP growth has been strong and less volatile than many of its peers as “large remittance inflows provide strong support to domestic demand.”

However, Fitch noted that the low government revenues remain a weakness in the Philippines’ credit profile, despite the government’s improvements in fiscal management.

It added that fundamental structural weaknesses include relatively poor governance standards, lagging development and a low average per capita income.

Meanwhile, the debt watcher said that its stable outlook for the Philippines reflects its assessment that upside and downside risks to the rating are currently well balanced.

It said that sustained strong GDP growth that narrows income and development differentials with “BBB” range peers, and broadening of the fiscal revenue base, as well as further improvements in the structure of the Philippine sovereign debt stock will be the main factors that could lead to a positive rating action.

However, the reversal of reform measures and deterioration in governance standards; sustained fiscal slippage; deterioration in monetary policy management; and instability in the banking sector could lead to a negative rating action.

Fitch also stated its key assumptions that the administration will persist with its fiscal, governance and social reform agenda.

It also said that the Philippines is not hit by a severe economic or financial shock sufficient to cause a significant contraction in GDP and trigger stress in the financial system.


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