“The rating for Ayala Corporation’s proposed P5 billion in 5-year bonds is PRS Aaa,” PhilRatings announced. A rating of PRS Aaa is defined as “having the smallest degree of investment risk. Interest payments are protected by a large or by an exceptionally stable margin and principal is secured. While the various protective elements are likely to change, such changes as can be visualized are most unlikely to impair the fundamentally strong position of such issues.”
In assigning the rating, PhilRatings zeroed in on the following key credit strengths: Ayala Corporation’s diversified portfolio of businesses with well-established markets; its strong financial flexibility, anchored mainly on its investments or holdings in publicly-listed companies; increasing dividend streams from subsidiaries and affiliates; as well the company’s committed shareholders and capable management team. Although Ayala Corporation’s present level of debt can be seen as moderately aggressive, with total debt at P60 billion, as of year-end 2003, PhilRatings views positively the company’s plans to replace a portion of its dollar borrowings (maturing in 2005) with the proposed peso issue. This reduces Ayala Corporation’s exposure to forex risk and partly addresses refinancing needs in the short- to medium-term. The peso issue is thus intended to replace already existing debt and will not represent a significant increase in additional borrowings.
Ayala Corporation’s core businesses are in: property development (through holdings in Ayala Land, Inc. – ALI); telecommunications (Globe Telecom, Inc. – Globe); and banking (Bank of the Philippine Islands – BPI). Both ALI and Globe also have PRS Aaa ratings for their respective public debt issuances. Ayala Corporation likewise has holdings in water distribution through Manila Water Company, Inc. (Manila Water) and smaller investments in electronics manufacture and automotive dealership. These other investments are largely self-sufficient in terms of supporting or raising their own funding needs.
In 2003, Ayala Corporation’s consolidated revenues amounted to P37.3 billion, up by 21% from 2002’s P30.9 million. Net income amounted to about P3.0 billion. As of mid-July 2004, the market value of Ayala Corporation’s shares in ALI, Globe, and BPI, amounted to about P112.4 billion, or about 1.95x the amount of debt (P57.6 billion) as of end-March 2004. These investments represent a significant store of value which can be unlocked, at the proper time or as needed, either to reduce debt or to take advantage of other investment opportunities. The company’s liquidity position is likewise strong with cash and cash equivalents (as of March 2004) amounting to P16.5 billion.