LGU Guarantee Corp gets top credit rating

MANILA, Philippines - The LGU Guarantee Corp. (LGUGC), a pioneering institution that guarantees LGU debt financing in the Philippines, has obtained a PRS Aa plus issuer credit rating from Philippine Rating Services Corp. (PhilRatings). 

According to PhilRatings, a company rated PRS Aa differs from the highest rated corporates only to a small degree, and has a strong capacity to meet its financial commitments relative to that of other Philippine corporates. A plus or a minus sign is added to further qualify the ratings.

The ratings are based on available information and projections at the time the study is ongoing. PhilRatings continues to monitor developments relating to LGUGC and may change the rating at any time, should circumstances warrant a change.

The ratings agency said that the ratings primarily considered the ability of LGUGC to consistently generate cash as a result of continuing profitable operations, the absence of any default on guaranteed financial bligations, and the debt-free situation of the company to date. 

Such has also allowed the company to pay dividends and increase its investment funds.

LGUGC’s broadly diversified investment structure complies with sound and tested investment policies and guidelines, and provides LGUGC with enough protection in terms of liquidity, profitability, and stability in the event of an economic downturn. It also strengthens the company’s ability to honor its guarantee commitments in the event of a default by an institution whose financial obligations have been guaranteed.

LGUGC reported a 17.1 percent year-on-year growth in revenues of almost P30 million for the first semester this year. For the same comparative period, guarantee fees increased by 50.8 percent to P11.8 million, while investment income also went up by 11.8 percent to P17.2 million. Guaranteed debts for the first semester 2010 amounted to P417.5 million compared to only P70 million during the first semester 2009. Net profit margin improved to 53.3 percent for the first semester 2010 from 50.9 percent during the same period last year.