The Philippines’ first US dollar-denominated Islamic bonds received investment-grade ratings from international debt watchers.
Fitch Ratings said Tuesday it assigned the Shari’ah-compliant trust certificate (sukuk) bonds a ‘BBB’ rating.
Land Bank of the Philippines – Trust Banking Group formed a special purpose vehicle called ROP Sukuk Trust to issue the bonds.
“The proposed sukuk’s rating is driven solely by the Philippines’ Issuer Default Rating 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,” Fitch said.
Moody’s Investors Service also assigned a senior unsecured rating of “Baa2” or investment grade to the issuance maturing in 2029.
The sukuk will constitute direct, unconditional and unsubordinated obligations of the government of the Philippines, according to the transaction documents made available to Moody’s.
The government on Monday announced the sale of its maiden Islamic bonds or Sukuk bonds.
The Bureau of the Treasury (BTr) said in an announcement it was planning the issuance of a benchmark-sized US dollar-denominated Sukuk bonds offering, which will have a 5.5-year tenure
The ratings mirror the government of the Philippines’ issuer rating of Baa2. Moody’s said its sukuk ratings do not express an opinion on the structures’ compliance with Shari’ah law.
“The Philippines’ Baa2 issuer rating is characterized by high potential growth and moderate government debt compared with peers, although the coronavirus pandemic had led to a weakening of our broader assessments for economic and fiscal strength,” Moody’s said.
“At the same time, the Philippines has sustained strong access to domestic and international funding markets, a stable banking system and ample foreign-currency reserves to weather global capital flow volatility,” it said.