S&P, Moody’s give Globe Telecom’s $175-M notes good rating

The two leading international credit rating companies, Standards and Poor’s and Moody’s Investors Service, have favorably graded the $175-million senior notes issuance of Globe Telecom, citing the telecom firm’s improving credit profile and continued strong operating and earnings performance.

Globe said earlier it would offer the 10-year fixed rate senior notes, a sizable portion from the $300-million bond offerings to support its funding needs this year, to fund the capital expenses mainly arising from the expansion and improvement of its wireless telephone network.

The Ayala-controlled company is a leading provider of mobile telephone services in the Philippines with an estimated five million subscribers, or about 42 percent of the total wireless subscribers.

In its latest credit assessment, Moody’s has, in fact, upgraded Globe’s ratings from stable to positive (Ba3 grade), reflecting improvements in the company’s profile and less uncertainty in its operating environment.

"The ratings recognizes the progress that Globe has made in establishing a strong and profitable GSM business, its measured approach to funding this growth, and the benefits of strong support from effective owners," Moody’s said.

It added the change in outlook to positive reflects Moody’s expectation that Globe will continue to grow with a lessening in risks associated with external factors. "The ability of Globe to fundamentally complete its network buildout and establish an ability to reduce debt will be critical to the future direction of the rating," it said.

Moody’s also cited that politics under the administration of President Arroyo has stabilized, "but any deterioration in the political environment could impact on Globe’s ongoing access to the capital markets, as well as its regulatory environment and prospects for continued growth."

S&P, meanwhile, affirmed its double ‘B’ (stable) corporate credit rating on Globe and assigned a double ‘B’ senior unsecured debt rating to the note issuance.

In a statement, S&P said the outlook on Globe is supported by its strong operating and earnings output, improving credit performance and supportive shareholders but are offset by its aggressive financial profile, high foreign currency risk exposure and increasing competition in the cellular market.

"Despite aggressive capital expenditures commitment of about $1.2 billion between 2002-2004, Globe’s established subscriber base, continued market growth, and further improvement in operating performance are expected to underpin its credit quality and should provide adequate cushion for debt service in the near- to medium-term," S&P said.