Fitch Ratings assigns ‘BBB’ to Philippines’ maiden Sukuk bonds

fitch ratings assigns ‘bbb’ to philippines’ maiden sukuk bonds

Fitch Ratings headquarters in New York, February 6, 2013. REUTERS/Brendan McDermid/Files

Credit watcher Fitch Ratings has given a “good credit quality” rating to the Philippines’ proposed maiden issuance of US-dollar denominated Sharia-compliant or Sukuk bonds.

In its rating action commentary, Fitch Ratings said it assigned a “BBB” rating to the government’s Sukuk bonds.

A “BBB” rating or “good credit quality” indicates that expectations of default risk are currently low and the capacity for payment of financial commitments is considered adequate.

However, adverse business or economic conditions are more likely to impair this capacity.

On Monday, the Department of Finance (DOF) launched a series of investor calls in Asia, Europe, Middle East, and the United States for the benchmark-sized US dollar-denominated Sukuk offering with a tenor 5.5 years.

A benchmark-size offering typically means at least $500 million, but the exact offering size remains undetermined.

Finance Secretary Benjamin Diokno earlier said the Philippines is eyeing to raise $1 billion through the sale of Sukuk bonds.

Sukuk is a financial instrument that complies with Islamic laws, by circumventing the traditional concept of interest through tying it with tangible assets or properties. Holders of Sukuk bonds receive portions of earnings generated from tied assets.

The DOF said the Sukuk offering will be the government’s maiden issuance of Islamic law-compliant financial instrument.

The Sukuk bond certificates will be issued by the Philippines through the Sukuk Trust —a special purpose trust formed under Philippine law and administered by the Land Bank of the Philippines-Trust Banking Group.

In its rating action, Fitch Ratings said the “BBB” rating for the Philippines’ Sukuk offering “is driven solely by the Philippines’ Issuer Default Rating (IDR), which we affirmed at ‘BBB’ with a Stable Outlook in November 2023.”

“This reflects our view that a default of the senior unsecured obligations would reflect a default of the Philippines, in accordance with our rating definitions,” the credit watcher said.

“We have not considered any underlying assets or collateral provided when assigning the rating, as we believe the issuer’s ability to satisfy payments due on the proposed Sukuk will ultimately depend on the government satisfying its unsecured payment obligations to the issuer under the transaction documents, as described in the offering memorandum and other supplementary documents,” it said.

Fitch Ratings, however, said that the risks on the credit rating of Sukuk bonds could arise from “reduced confidence in strong, stable medium-term economic growth and continued adherence to sound economic policies” as well as “failure to gradually reduce government debt/GDP ratio, for example, due to slowing fiscal consolidation to support growth.”

Moreover, the credit watcher said that significant deterioration in foreign-currency reserves and the country’s net external debt position, for example, due to more persistent current account deficits than currently forecast.—AOL, GMA Integrated News

This article Fitch Ratings assigns ‘BBB’ to Philippines’ maiden Sukuk bonds was originally published in GMA News Online.

OTHER NEWS

22 minutes ago

UofT pro-Palestinian protesters face deadline to clear out by Monday morning

22 minutes ago

'I feel I overachieved'

22 minutes ago

Muddled No 10 picture, poor attack and refusal to take points – strategic errors cost Leinster the ultimate prize

22 minutes ago

A letter to Norway’s foreign minister: Your country's actions have been disturbing

28 minutes ago

Proteas ‘were taught a few lessons’ in West Indies humiliation ahead of T20 World Cup

28 minutes ago

Met Office monday morning weather forecast 27/05/2024

28 minutes ago

Politicians need to 'get beyond the Canberra bubble' and think about regional Australia

28 minutes ago

A growing number of students rely on free school meals. What happens in the summer?

28 minutes ago

Could Injury Force Bills Tommy Doyle to Switch Positions?

29 minutes ago

Labor could bend on airport rail if $7b offer stands

29 minutes ago

Guenther Steiner’s dig as Haas suffer double DSQ from Monaco qualifying

29 minutes ago

'Limited' chance of Lehrmann paying mammoth legal bill, judge says

29 minutes ago

Is Netanyahu bound to a path of ruin?

29 minutes ago

An Oil-Patch Brawl Over a $53 Billion Megadeal Entwines the Legacies of Three CEOs

29 minutes ago

No 'perfect ending' but Murray proud of French Open legacy

29 minutes ago

Kate Beckinsale fires back at claims she is 'too thin' amid recent health scare: 'I am trying to survive'

29 minutes ago

'Squatter's' bizarre excuse for living in half-million-dollar Colorado home without paying rent for a year after owner died without a will

29 minutes ago

Johnny Wactor's General Hospital co-stars Kirsten Storms and more react to his tragic passing after protecting a female co-worker from gun-wielding thieves: 'I'm in a state of disbelief and complete sadness'

31 minutes ago

Some employers are reluctant to hire college grads who attended pro-Palestinian protests, survey finds

33 minutes ago

Military labs do the detective work to identify soldiers decades after they died in World War II

33 minutes ago

Meet the art collectors with home galleries: 'The stock market doesn't give me any fulfillment'

34 minutes ago

Latest deadly weather in US kills at least 18 as storms carve path of ruin across multiple states

34 minutes ago

Albanese's response to the ICC will 'dog us' for a long time

34 minutes ago

Ukraine waiting on a six-month request for help

34 minutes ago

Real estate agent called out after major error in promotional flyer - here's why Aussies are not impressed

37 minutes ago

Bill Maher: It’s not that I’ve gotten old. It’s that your ideas are stupid

37 minutes ago

Aussie dad unleashes at school after his daughter was forced to make a group apology to the Stolen Generation

37 minutes ago

At least 18 people killed as tornadoes and storms rip through Texas, Arkansas and Oklahoma

37 minutes ago

Jase and Lauren rival The Kyle and Jackie O Show as they launch $250,000 giveaway on rival network

42 minutes ago

First time buyers shun new builds after Government axes Help to Buy

42 minutes ago

Teachers ‘will be given free speech protection from blasphemy claims’

42 minutes ago

Orlando Pirates to let go of 12 players in mass exodus?

42 minutes ago

Liverpool's stance crystal clear after Barcelona hold Luis Diaz transfer meeting

42 minutes ago

Leeds face Graham Potter conundrum in bid to avoid repeat of 14-year Premier League misery

42 minutes ago

Unbeaten Spirit edge Voltigeurs at Memorial Cup

42 minutes ago

West Gate Tunnel builders sue project engineers over 'design errors'

42 minutes ago

‘Frustrating’ decisions irking struggling Lions

45 minutes ago

The Week ahead in business: ECB chief economist Philip Lane in Dublin, CSO figures on consumer prices, and an update on housing

45 minutes ago

Christopher Bell wins the Coca-Cola 600 after race called with 151 laps left due to wet weather

45 minutes ago

Outcasts Adam Idah and Troy Parrott win fans as Jake O’Brien makes mark in French final battle