Tuesday, January 08, 2013

Philippines likely to attain investment-grade rating this year - Bank of America

Merrill Lynch (BofA-ML) said the Philippines may likely attain investment grade status this year as its strong economic growth and better finances make it more attractive and less risky for those who would place their bets on the country.

In its outlook, the investment bank said the country's improving balance sheet, large current account surplus and falling public debt ratios will likely earn it the credit rating upgrade this year.

In addition to its better finances, the Philippines' strong growth in recent years has not been accompanied by a sharp rise in household debt or domestic credit, BofA-ML said.

The Philippines is rated just a notch below investment grade by the world's top three credit rating agencies, namely Fitch Ratings, Moody's Investors Service and Standard and Poor's Ratings Services. 

Last month, S&P revised its outlook on the Philippines from stable to positive, signaling a possible upgrade in the actual rating.

A rating upgrade means the cost of borrowing, especially from foreigners, would fall given the improvement in the Philippines' risk profile.

This would also benefit big companies that borrow abroad since the sovereign rating is a factor that determines their debt scores as well.

First Metro Investment Corp on Monday said the Philippines' success in retiring old and more expensive debt or extending maturities of its existing obligations would likely earn for the country a credit upgrade this year.

BofA-ML said the Philippines' plan to extend the duration and retire bonds has "helped underpin investor interest." This is evident in the country's liquid debt papers maturing in years 2021, 2026, 2034 and 2037. The interest rates of these bonds have already tightened by 3-9 basis points, slightly more than that of Indonesia's, considered another investors' darling.-Interaksyon (January 08, 2013 3:46PM)

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