MANILA, Philippines – International credit rating agency Moody’s has affirmed Philippine Long Distance Telephone Co.’s Baa2 local currency issuer rating with stable outlook, concluding the rating review initiated last March, but warned that it would view negatively any additional material investment by PLDT into non-core businesses.
Moody’s emphasized that the stable outlook reflects its expectation that PLDT will execute its business plan as outlined and that no additional investment in Manila Electric Co. (Meralco) or any other non-core business is considered.
At the same time, Moody’s also affirmed PLDT’s Ba2/positive foreign currency bond rating, which was not on review.
The ratings affect about $550 million of PLDT’s debt securities, Moody’s said.
“The rating confirmation reflects PLDT’s increased appetite for risk as a result of the recently announced Manila Electric Co. (Meralco) acquisition which, given funding plans, will result in an increase in leverage and weakened cash flow metrics,” according to Moody’s vice president Laura Acres, noting that such concern is counter-balanced by PLDT’s solid financial profile post-acquisition which can be contained with the Baa2 rating.
“While Moody’s is also concerned about the move into a non-core business, it does acknowledge that various operational synergies exist as well as a potential defensive play which will ensure PLDT’s access to Meralco infrastructure,” Acres, also Moody’s lead analyst for PLDT, added.
PLDT earlier announced that it plans to tap the debt market in order to raise a portion of the P20 billion needed by its subsidiary Pilipino Telephone Inc. (Piltel) to acquire a 20-percent stake in Meralco.
PLDT chairman Manuel Pangilinan has said that while PLDT has already put a 20-percent cap on its investments in Meralco, Metro Pacific Investments Corp. (MPIC) to which PLDT’s Beneficial Trust Fund (BTF) is transferring its Meralco stake, is open to acquiring more shares in the latter. MPIC and PLDT are both subsidiaries of Hong Kong-based First Pacific Co.
PLDT BTF earlier acquired 10.17 percent of Meralco after accumulating 113.3 million shares of the latter from Feb. 3 to March 6 through the open market.
Pangilinan explained that the PLDT group’s investment in Meralco will allow strategic access to the latter’s assets, including its fiber optic backbone, its 4.5-million subscriber base, electric poles, among others.