Moody’s rates PLDT’s P15-B bond issue credit positive

MANILA, Philippines - New York-based Moody’s Investors Service said the ongoing fund raising of Philippine Long Distance Telephone Co. (PLDT) involving the issuance of up to P15 billion in bonds is credit positive as this would improve the company’s debt profile by reducing foreign exchange risks.

Moody’s assistant vice president Yoshio Takahashi said the proposed bonds would help PLDT further term out its debt maturity profile despite the moderate increase in its total outstanding debt.

“While the debt offering could modestly increase total debt outstanding in the near term, it will help PLDT to term out its debt maturity profile and reduce foreign exchange rate risk,” Takahashi stressed.

Of the total P110 billion outstanding debt of PLDT as of end-September 2013, about 16 percent or P17.7 billion were due between the fourth quarter of last year and this year. About P4 billion were due in the fourth quarter of last year and another P13.7 billion this year.

PLDT intends to use the proceeds of the seven- and 10-year bonds to fund its capital expenditures and refinance approximately 40 percent or P5.6 billion of its maturing debt this year.

With the new bonds, Takahashi said the total debt maturing beyond 2018 of PLDT would improve to over 40 percent compared to only 30 percent as of end-September last year.

Furthermore, he added that the refinancing would help reduce foreign exchange rate risk as the large majority of PLDT debt or P4.6 billion ($105 million) to be refinanced is US dollar-denominated term.

At end-September 2013, about 55 percent of PLDT’s total debt or P60 billion ($1.38 billion) were denominated in US dollars. Of the total amount, about 39 percent or $972 million were unhedged.

The Moody’s analyst said it is more important for PLDT to reduce its US dollar exposure as the peso weakened by 8.7 percent against the greenback last year.

Following the issuance, PLDT’s total debt would increase moderately this year but adjusted debt or EBITDA is likely to stay in the range of 1.5 times to 1.7 times.

Takahashi added that PLDT has $600 million in revenue and $169 million in cash at end-September last year.

“These US dollar funds will also help PLDT to manage the foreign exchange rate risk,” he said.

Aside from Moody’s, Standard & Poor’s and Fitch Ratings gave PLDT an investment grade rating.

PLDT booked a two percent increase in net income to P29 billion as consolidated service revenues likewise inched up two percent to P121.6 billion from January to September last year.

PLDT’s cellular subscriber base stood at 72.5 million as of end-September. Wireless subsidiary Smart Communications Inc. had 24.7 million subscribers while value brand Talk ‘N Text ended with 31.9 million. Digital Telecommunications Philippines Inc. had 15.8 million Sun Cellular subscribers.