MANILA, Philippines — Pangilinan-led PLDT Inc. can recover its “BBB+” credit rating once the company cuts its debt level as a measure of its earnings to below 2.5x, according to global credit rating firm S&P.
S&P associate director for corporate ratings Spencer Ng said that PLDT could regain it “BBB+” rating once it manages to bring down debt and sustain the growth of its revenue.
Ng said S&P has given PLDT a lower credit rating of “BBB” because its debt as a ratio of its earnings before interest, taxes, depreciation and amortization (EBITDA) has gone up to 2.5x.
Ng attributed the spike in PLDT’s debt-to-EBITDA ratio to the budget overrun that the firm experienced between 2019 and 2022.
PLDT managed to reduce its capital expenditure overspend to P33 billion from P48 billion, as a result of negotiations with multiple vendors.
Although PLDT said that its debt-to-EBITDA ratio would remain around the 2x level, S&P decided to downgrade the company’s credit rating due to projections of increased lease liabilities.
PLDT has sold more than 7,500 towers for at least P98 billion. As such, S&P believes that PLDT’s performance and leverage as a telco giant will endure pains from the budget overrun and its rising payables.
S&P expects that up to P22 billion of the budget overspend will be settled within the year through PLDT’s P85 billion capex.
Likewise, it projects that the residual P10 billion of that capex overrun will be reflected in the 2024 budget, putting the telco in a position to return to free cash flow by 2025 only.
For this year, PLDT expects to borrow around P19 billion from local banks to support its capex and settle debts. It also hopes to cut its spending to as low as P80 billion from P96.8 billion in 2022.
PLDT saw its profit drop by 60 percent to P10.49 billion last year from P26.37 billion in 2021 due to the depreciation of legacy assets and the impact of the budget overrun.
On the other hand, earnings grew by six percent to P205.25 billion as services raked in a record P196.23 billion, a development that S&P said would be sustained in the next few years.