First Holdings, Filinvest Land retain credit rating

The country’s leading credit rating agency Philippine Rating Services Corp. has maintained its PRS Baa rating for First Philippine Holdings Corp.’s (FPHC) P800- million long-term commercial papers maturing between November this year and January 2004.

PRS Baa refers to "Neither highly protected nor poorly secured" while interest payments and principal security appear adequate at present, certain elements may be lacking or characteristically unreliable over any great length of time.

Philratings has taken into consideration recent developments that allowed FPHC to extend the maturity of subsidy FGHC International Ltd.’s outstanding $60 million facility. From June 30, the maturity of the loan was extended up to July 15, from the original maturity date of May 22, 2003.

With the extension, FPHC has disclosed that it partially paid $15 million of the outstanding amount plus interest on June 30. This will leave a balance of $45 million under the facility.

Philratings also noted that FPHC is now working on a new financing facility which will be used to settle the existing loan.

Adding to the company’s sources of funds are proceeds from the sale of ownership interest in Panay Power Corp. (PPC) by several power generation companies under the FPHC Group. From this asset sale, FPHC stands to receive $20 million as its share, considering its stakes in the companies that sold their ownership in PPC.

PPC, which operates a 72-megawatt bunker diesel plant in La Paz, Iloilo, was sold to Global Business Holdings Inc. and First Metro Investment Corp. – both units of the Metrobank group of tycoon George Ty.

Meanwhile, Philratings said it has also retained its PRS AA rating for Filinvest Land Inc.’s P2 billion long-term commercial papers which will mature on Nov. 19, 2004.

The rating is defined as: "With large margins of protection. Fluctuations of protective elements, however, may be of greater amplitude or there may be other elements present which make the long-terms risks appear somewhat larger than for PRS Aaa-rated securities."

PRS Aaa-rated securities are defined as those with the "smallest degree of investment risk."

Philratings said FLI has already signified its intention to refinance the LTCPs maturing next year with another P1.5 billion LTCP issue.

Internally-generated cash from operations, as well as liquefication of existing receivables are likewise being looked at as additional sources to settle the maturing LTCPs, Philratings said.

Philratings said FLI continues to demonstrate a relatively stable revenue, earnings, and cash flow performance despite a still sluggish property development sector.

In the first three months of the year, FLI’s home unit sales grew 27 percent with a 45 percent increase in sales value. This was largely driven by sales from projects catering to the middle-income segment.

FLI expects to sustain its strong performance for the rest of year through its continuous brand-building strategy aimed at attracting more buyers.

"The effects of these moves on volumes, however, still have to be weighed against the backdrop of a slowly recovering economy and issues like the effect of the imposition of the value-added tax on home financing transactions," Philratings said.

As of end-March 2003, FLI’s capitalization structure remains conservative, with a debt-to-capitalization ratio of 18 percent. Total interest-bearing debt amounted to P3.4 billion, P3.2 billion of which is still classified as long-term.