DLSU seeks exemption from credit rating rule

De La Salle University has asked the Securities and Exchange Commission anew to exempt it from the standard credit rating requirement for bond issues.

DLSU, through investment house Investment & Capital Corp. of the Philippines (ICCP), has asked the SEC to reconsider an earlier decision denying its request for exemption from the credit rating requirement for all companies intending to issue bonds or commercial papers.

ICCP is the lead underwriter for DLSU’s proposed bond issue.

DLSU did not indicate how much it hoped to raise from the bond issue.

ICCP president and chief operating officer Rommel Leuterio said while the rating of bond issues are primarily done to determine the issuer’s ability to service its financial obligations on the strength of its cash flows, DLSU may not get an appropriate credit rating that would truly reflect its capability to service its financial obligation under the proposed issue.

"Inasmuch as DLSU is a non-stock and non-profit organization, its historical cash flows show only slim margins from its operations," Leuterio said.

Nevertheless, Leuterio said the issue was structured to make its repayment virtually risk free, adding that proceeds from the offering shall be placed in a separate trust account with a reputable financial institution and shall not be co-mingled with the general funds of DLSU.

The net proceeds of the issue are not intended to be withdrawn except to service bond redemption or to defray costs associated with bonds used to pay tuition.

Leuterio said only the investment income of the trust account will be used to support DLSU’s ongoing programs for research and development, tuition subsidy and scholarships to deserving indigent students.

He also stressed that DLSU maintains a very financially sound balance sheet with a debt-to-equity ratio of merely 0.3:1 which is well within the required level.

Even considering the intended issue, Leuterio said DLSU’s resultant debt-to-equity ratio will only increase to about 0.6:1 which is still well within the limits set in the stated provision. – Zinnia dela Peña