BDO Leasing to issue P25-B commercial papers

MANILA, Philippines - BDO Leasing and Finance Inc. will issue P25 billion worth of short-term commercial papers.

The issuance was assigned an issue rating of PRS 2 by local credit watcher Philippine Rating Services Corp.

A PRS 2 rating is defined as “above average (strong) capability for payment of commercial paper issue on both interest and principal. “

Philratings said earning trends and coverage ratios, while sound, would be more subject to variations. 

The rating took into account BDO Leasing’s close strategic relationship with its parent firm, its experienced management and the favorable outlook for the leasing and finance industry due to continued domestic economic growth. 

“These rating factors are counterbalanced by BDO Leasing’s  increasing leverage, with debt as the main source for the company’s continued expansion and expectations of tempered profitability over the short-term,” Philratings said.   

BDO Leasing is the leasing and financing arm of the BDO Group, with varied interests in banking, investment banking, bancassurance, insurance brokerage and stock brokerage.   

Its leasing products include finance lease, operating lease, direct lease and sale-leaseback.  Financing services comprise commercial loans, retail loans, installment paper purchase and factoring of receivables. 

The anticipated continued growth of the Philippine economy favors the country’s leasing and finance industry, as this brings increasing demand for capital equipment, a thriving consumer market, and tame inflation and lending rates. 

A research on the industry estimated the value of the financial leasing industry to be around P70 to P80 billion, with an annual growth rate of around 13 percent.

 With the domestic industry dominated by players which are wholly-owned subsidiaries or affiliates of top Philippine banks, BDO Leasing benefits from name recognition and marketing referrals provided by BDO through the bank’s wide branch network and its Institutional Banking Group.

“As the bank’s principal unit for its leasing and financing business, BDO Leasing is considered as strategically important to the BDO Group.  BDO has a strong presence in BDO Leasing’s board of directors, with Teresita T. Sy serving as chairperson of both BDO and BDO Leasing,” Philratings said.

PhilRatings noted that BDO Leasing’s  leverage has been increasing, with additional borrowings used to fund portfolio expansion in recent years. 

Forecasts for 2015 and 2016 show debt will remain as BDO Leasing’s main funding source, albeit growth in outstanding bills payables will slow down for the projected period. 

Short-term profitability is expected to slow down, as additional borrowings to finance growth brings increased interest and financing charges. 

Apart from this, expenses related to the transfer of BDO Leasing’s head office are expected to have a significant impact on the company’s bottomline for this year and next year.