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Friday, January 28, 2005
Espinoza: Downgrade
By Fred C. Espinoza
UNPERTURBED. When the news broke out sometime last week that Standard & Poor’s had decided to downgrade the Philippines’ sovereign credit rating system, the country’s biggest conglomerates were reportedly “unperturbed.”
They said the cut simply indicated that the government’s response to its fiscal problems was not enough.
It turned out, however, that in line with the sovereign downgrade, S&P also revised its long-term foreign currency corporate credit ratings on San Miguel Corp. (SMC), Universal Robina Corp. (URC), National Power Corp., Philippine Long Distance Telephone Co. and Globe Telecom Inc.’s local currency to “BB-” from “BB.”
But the report cited sources from the Ayala Group as saying they did not see any major adverse effects of S&P’s decision on their borrowing program.
They said they had pre-funded this year their maturing liabilities of roughly $200 million and part of next year’s $70 million in liabilities.
Likewise, sources from Gokongwei-led food and beverage firm URC said the group was fully funded for its expansion and liquidity requirements in the next few years. The same source said URC had successfully raised $200 million from a fixed rate issuance of URC Philippines Ltd.
Even SMC has maintained a stable outlook. As reported yesterday, Southeast Asia’s biggest food and beverage group was poised to acquire Australia’s National Foods Ltd. To achieve its ambition, it will borrow “up to $1.85 billion.”
But on the part of the administration, there is guarded optimism, if you take into account the latest feedback that the Philippine government is again on a mission to convince California Public Employees Retirement System (Calpers), the biggest pension fund in the United States, to retain its multibillion-dollar investments here as fresh threats of a pullout rise anew.
Calpers has an estimated $67 million in portfolio investments in the Philippines, the report said.
Talks of a possible delisting of the Philippines from Calpers’ list of permissible investment sites arose after the country suffered from a credit rating downgrade. Fitch Ratings downgraded its outlook on the Philippines from stable to negative last month.
While the Arroyo administration has laid down several revenue-raising measures to address the government’s fiscal woes, some creditors are waiting until after the measures are successfully implemented, the report said.
NO AID. It seems that the reaction of foreign creditors and investors could have been sparked by the Bush government’s recent move to exclude the Philippines from the list of countries eligible for $1.5 billion in international aid being administered by Millennium Challenge Corp., citing underperformance in fighting corruption and easing fiscal woes, the report said.
Earlier, the Asian Development Bank said the Philippines’ tax structure contains loopholes that encourage corruption and tax evasion. It said corporate taxpayers in the Philippines, on the average, declared only 77 percent of their revenue.
(January 28, 2005 issue)
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