No debt upgrade for PLDT – Moody’s

MANILA, Philippines – The decision of Moody’s to review Philippine debt ratings for upgrade bears no immediate impact on the debt rating of telco giant Philippine Long Distance Telephone Company (PLDT).

In a statement Friday, July 26, Moody’s assistant vice president and analyst Yoshio Takahashi said that the placement on Thursday of the Ba1 foreign and local currency long-term issuer and bond ratings of the Philippines for upgrade has no immediate impact on the stable outlook of PDLT’s rating.

Following an improvement in the sovereign’s credit rating in October 2012, Moody’s upgraded that of PLDT by one notch to Baa2 from Baa3.

Moody’s Investors Service clarified that given their guidelines regarding the differential between government and corporate ratings, the possible upgrade of the sovereign rating would allow them to review PLDT’s rating for upgrade if its fundamental credit quality is assessed to be at Baa1 or above.

However, the agency believes that PLDT’s Baa2 rating is an appropriate representation of the company’s fundamental credit strength.

Meanwhile, high dividend payout ratio and the perceived increase in the telco’s appetite for investment put constraint on the rating.

Moody’s would consider upgrading PLDT if the company satisfies the following conditions:

1. Maintains adjusted consolidated EBITDA margins of over 45%
2. Lowers its adjusted consolidated debt/EBIDTA to below 1.5 times on a sustained basis
3. Ensures that shareholder returns and asset investments are not expected to be so large in the near-term

“Moody’s expects PLDT’s adjusted debt/EBITDA to remain in the 1.5-2 times range in the next two years, as it is likely to maintain a 100% dividend payout ratio, comprising a 70% regular dividend and 30% special dividend,” according to Moody’s statement.

“We expect PLDT to maintain its strong earnings. Its adjusted consolidated EBITDA margin is likely to stay at around 50%, given its strong market positions in the fixed-line, broadband and cellular services businesses in the Philippines,” said Takahashi.

Earlier this year, major credit rating firms Fitch and S&P upgraded PLDT’s credit rating by a notch above investment grade status. PLDT is the first Philippine corporation to reach that rating from 3 international credit watchers, including Moody’s.

PLDT offers the most expansive and diversified range of telecommunication services across the country’s most extensive fiber optic backbone and fixed line, cellular and satellite networks. – Rappler.com