PhilRatings downgrades credit status of STI Education’s P3-b bond issuance

Philippine Rating Services Corp. said over the weekend it downgraded the credit rating of STI Education Services Group Inc.’s outstanding P3-billion bond issuance because of the company’s declining profitability.

PhilRating  said in a report it changed the issue credit rating for STI-ESG P3-billion bond issuance to PRS A plus with a negative outlook from PRS Aa with a stable outlook.

It said while obligations rated PRS A still had favorable investment attributes and were considered upper-medium grade obligations, they were more susceptible to the adverse effects of changes in economic conditions.

The negative outlook indicates there is a potential for the credit rating to be downgraded in the next 12 months.

PhilRatings said the demand for tertiary education had remained resilient but STI-ESG’s profitability was declining because of lower enrollees, increasing competition and rising expenses on depreciation and interest charges. STI was significantly influenced by non-core items.

It said the increasing economic uncertainty and the adverse impact COVID-19 pandemic on the economy were also weighing on STI-ESG’s business.

STI ESG network had 64 active schools across the country including 60 STI Colleges and four STI Education Centers as of September 2020.  STI ESG owns 33 schools, while franchisees operate 31 institutions.

STI ESG recorded lower number of students at 76,841, 74,798 and 62,470 for school years 2018-2019, 2019-2020 and 2020-2021, respectively.

STI-ESG said it implemented initiatives to provide a wide range of courses for the tertiary level to compete in the industry and align its offering with the market needs and demands.

It also offered installment payment schemes to students for lighter payment plan.

STI-ESG said it implemented a rationalization plan to streamline operations. The group closed down some schools that were no longer viable because of low enrollment turnout or high cost of rent.