TEXT-S&P revises outlooks four Philippine entities to positive

Thu Dec 20, 2012 3:10am EST

(The following statement was released by the rating agency)

Dec 20 - Standard & Poor's Ratings Services today revised its rating outlooks on four Philippine entities--Power Sector Assets & Liabilities Management Corp. (PSALM), National Power Corp. (Napocor), Philippine Long Distance Telephone Co. (PLDT), and Development Bank of the Philippines (DBP)--to positive from stable. At the same time, we affirmed all the ratings on the four entities. The outlook revision comes after a similar action on the sovereign credit rating on the Republic of Philippines (BB+/Positive/B; axBBB+/axA-2).

RATINGS LIST

To From

Power Sector Assets & Liabilities Management Corp.

National Power Corp.

Corporate credit rating

Foreign currency BB+/Positive/-- BB+/Stable/--

Local currency BB+/Positive/-- BB+/Stable/--

ASEAN regional scale axBBB+/-- axBBB+/--

Senior unsecured BB+ BB+

Philippine Long Distance Telephone Co.

Corporate credit rating

Foreign currency BBB-/Positive/-- BBB-/Stable/--

ASEAN regional scale axA-/-- axA-/--

Senior unsecured BBB- BBB-

Development Bank of the Philippines

Issuer credit rating BB+/Positive/B BB+/Stable/B

ASEAN regional Scale axBBB+/axA-2 axBBB+/axA-2

Senior Unsecured

BB+ BB+

axBBB- axBBB-

Subordinated BB- BB-

Junior Subordinated BB- BB-

We consider the stand-alone credit profiles of PSALM and Napocor as weak and heavily dependent on the support of the Philippine government. The outlook revision reflects our opinion that both utilities are almost certain to receive timely and sufficient extraordinary government support in the event of financial distress. Our view is based on our assessment that PSALM and Napocor: (1) play a critical role in implementing government reforms in the power sector and providing missionary electrification in the country; and (2) benefit from an integral link with the government, which fully owns both utilities and has control over key budgetary and strategic decisions. The Philippine government also provides an irrevocable, unconditional, and timely guarantee on all debt obligations of PSALM and Napocor.

The foreign currency rating on PLDT remains constrained by our 'BBB-' transfer and convertibility assessment on the Philippines. The rating reflects the company's strong position in the domestic market, diversified services, integrated network, and solid cash flow measures. The country and macroeconomic risk of the Philippines and intense competition in the matured domestic cellular market temper these strengths.

The ratings on DBP are equalized with the sovereign credit ratings on the Philippines. DBP plays a critical public policy role in supporting the economic and social development of the Philippines and has an integral link to the government. Therefore, we see an "almost certain" likelihood that the government will provide timely and sufficient extraordinary support to DBP in the event of financial distress.

RELATED CRITERIA AND RESEARCH

-- Republic Of The Philippines Outlook Revised To Positive; 'BB+/B' And 'axBBB+/axA-2' Ratings Affirmed, Dec. 20, 2012

-- 2008 Corporate Criteria: Analytical Methodology, April 15, 2008

For PSALM, NAPOCOR

-- Rating Government-Related Entities: A Primer, June 14, 2006

For PLDT:

-- Methodology: Criteria For Determining Transfer And Convertibility Assessments, May 18, 2009

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