Investment grade seen next year as S&P raises PHL outlook 

(Updated 7:45 p.m.) Debt watcher Standard & Poor's Ratings Services raised the Philippine outlook to “positive” from “stable,” signaling a possible ratings upgrade to the coveted investment grade next year.   “We revised the outlook to positive to reflect our reappraisal of the political and institutional factors underlying the ratings,” S&P credit analyst Agost Benard said in a statement Thursday.   “In our view, the current administration possesses a level of legitimacy, support, and stability that reduces political uncertainty and allows for improved legislative efficiency,” he added, noting that conducive policy setting has led the Aquino administration to focus on fiscal consolidation, increased infrastructure provision, and poverty reduction.   While the debt-watcher affirmed its BB+ rating – one notch below investment grade – on Philippine debt, it said a raise in ratings next year is likely should fiscal and governance reforms maintain steam.   “We may raise the ratings next year on an improved government revenue structure, a continued diminished reliance on foreign currency government debt financing, or a lower government debt burden,” the statement read.   “We may also raise the ratings if institutional and structural reforms lead to improved investment environment, and thus better growth potential,” it added.   In a separate statement, Finance Secretary Cesar Purisima said a ratings upgrade may come as a surprise.   “By focusing on the fiscal and macroeconomic stability of the country, reducing the infrastructure gap, and making doing business in the Philippines even more fun, we are confident that we will attain investment grade sooner rather than later,” he said.   The upward revision in outlook came after Congress passed the contentious sin tax reform measure, which raised excise taxes on alcohol and tobacco products. The measure was signed into law by President Benigno Aquino III on Thursday.   Credit ratings agencies have said passing the law reforming sin taxes is crucial in snagging an investment grade.   Finance Department showed that for the first 10 months of the year the Philippines attained double-digit growth in the revenue collections.   The government was likewise successful in reducing the foreign component of its borrowing program, selling $750 million in 10-year global peso notes and $500 million in dollar bonds to local investors.   In another statement, Malacañang said, “We welcome this acknowledgment of the positive strides the Philippines has taken under the Aquino administration and a recognition of our thrust that indeed good governance results in good economics.” Companies also upgraded Ratings outlook on four homegrown companies were also upgraded by S&P to “positive” from “stable”, following the raise in the Philippine's “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,” S&P said in a separate statement. The raise in outlook may also mean a looming upgrade in actual credit ratings of the four companies. Currently, DBP, Napocor and PSALM are rated at BB+ (one notch below investment grade), while  PLDT is rated at BBB- (low-medium investment grade). “We consider the stand-alone credit profiles of PSALM and Napocor as weak and heavily dependent on the support of the Philippine government,” S&P said. The debt watcher said revision for the two state-run firms “reflects our opinion that both utilities are almost certain to receive timely and sufficient extraordinary government support in the event of financial distress.” The upgrade in PLDT's outlook “reflects the company's strong position in the domestic market, diversified services, integrated network, and solid cash flow measures,” S&P noted. Noting the state-run bank's “ integral link to the government,” the debt watcher said “ratings on DBP are equalized with the sovereign credit ratings on the Philippines.” — Siegfrid O. Alegado/VS/BM, GMA News