ALI gets highest credit rating for bond issuance

Property giant Ayala Land Inc. (ALI) has obtained from local credit watchdog Philippine Rating Services Corp. (PhilRatings) a sterling credit score for its proposed offering of as much as P7 billion in 10-year retail bonds.

In a recent press statement, Philratings said it had assigned its highest issue credit rating of “PRS Aaa” with a “stable” outlook to ALI’s fresh bond offering, which would form part of the property company’s three-year debt securities program worth up to P50 billion.

ALI has so far issued a total of P25 billion in a combination of fixed-rate bonds and “homestarter” bonds (proceeds from which can be used as downpayment for the purchase of a housing unit) in relation to this debt securities program since the first issuance last March 2016. These issues were similarly rated “PRS Aaa” with a “stable” outlook.

Obligations rated PRS Aaa are deemed of the “highest quality with minimal credit risk.” This meant the issuer’s capacity to meet its financial commitment on the obligation was “extremely strong.”

The outlook, on the other hand, would indicate the direction of any rating change within a one year period and as a further refinement to the assigned credit rating for the guidance of investors, regulators and the general public. A stable outlook meant the rating was likely to be maintained or would remain unchanged in the next 12 months.

Philratings said the assigned rating had taken into account ALI’s “continuously growing profitability, coupled with healthy cash flow generation and high cash reserves.”

The credit watchdog said it had also factored in ALI’s “sound capitalization, with a manageable debt level and mix; well-diversified portfolio, with a sizable and strategic landbank for future expansion, complemented by solid brand equity and a highly-experienced management team; and, its sustained healthy outlook for the real estate industry backed by sound economic fundamentals.”

ALI is one of the largest real estate conglomerates in the Philippines, with its operations organized along several business lines: property development (residential, office and commercial as well as industrial development projects); commercial leasing (shopping centers, offices and hotels and resorts); and services (construction and property management).

With 9,852 hectares of landbank as of end-2016, ALI is seen to have sufficient resources for development in the next few years.

The company is targeting to achieve P40 billion in net income after tax by 2020, translating to a 20-percent average annual growth rate from the P11.7-billion net profit achieved in 2013. In 2016, the company recorded P20.9 billion in net income attributable to equity holders, and which represented a 19-percent growth from the P17.6 billion in 2015.

For 2017, the company earmarked around P87.6 billion for capital expenditures to support its continued growth.

“The prospects for the real estate industry continue to remain healthy, with numerous projects in the residential, office and retail sectors lined up for the medium-term period. Demand also remains robust, with the continued growth of the domestic economy, the existence of a substantial housing backlog, a growing business process outsourcing industry, rising remittances and growing disposable incomes,” Philratings said.