SEC approves credit rating accreditation of PRSC

The Securities and Exchange Commission (SEC) has approved the application of Philippine Rating Services Corp. (Philratings) for accreditation as a credit rating agency (CRA).

Philratings is Standard & Poor’s affiliate in the Philippines and a member of the Association of Credit Rating Agencies in Asia, an organization of 19 CRAs in the region.

Philratings has been doing credit rating for the last 18 years. It participates actively in the development of the Philippine capital market by implementing a national credit rating system.

The approval followed Philratings’ compliance with the accreditation requirements of Rule 12.1 of the Securities Regulation Code. Philratings has an authorized capital of P10 million.

A credit rating provides an objective, independent evaluation of the creditworthiness of a borrower or its ability to meet its financial obligations upon maturity, as expressed through rating symbols. Its purpose is to evaluate the predictability of cash generation of a borrower based on prevailing conditions and information made available to a credit rating service at the time of rating.

The Bangko Sentral ng Pilipinas (BSP) earlier approved the recognition of Philratings as a domestic CRA for bank supervisory purposes, the first domestic CRA to be accredited by the BSP. Eligibility criteria for recognition include a minimum five-year track record in issuing reliable and credible ratings; a pool of experienced analysts; competent and experienced board of directors; an established rating methodology; and an established record of independence, objectivity, and transparency.

In addition to the recognition by BSP, Philratings’ ratings have been used by the SEC as basis in approving various companies’ applications for licenses to issue debt securities to the public.

Philratings has assigned ratings since 1985 to 347 debt issues (e.g. commercial papers, bonds) of 89 companies with an accumulated face value of P302.9 billion as of end-Dec. 2003.

Formerly known as CIBI Ratings, Philratings was part of Credit Information Bureau Inc. (now known as CIBI Foundation), set up in 1982 by the SEC, Central Bank and the Financial Executives Institute of the Philippines.

CIBI was organized to serve as a third-party, objective source of business and individual information. Philratings was spun off into a separate corporation in 1998. It remains a 100-percent-owned subsidiary of CIBI Foundation.

In performing its credit rating function, Philratings relies on the database of information that it has built since 1985. This includes all companies with commercial paper or bond issues that have been rated, as well as prospective issuers.

Aside from rating commercial paper issuers, Philratings also offers ratings for banks and financial institutions, local government units, project finance transactions, and asset-backed securities. Other services include: credit training, financial or credit indicators based on publicly-available information, business valuation, and due diligence studies.