Conglomerates ready for higher interest rates

MANILA, Philippines — Some of the country’s conglomerates are ready for a higher interest rate environment, saying that most of their debts are fixed-rate and have long-term maturities.

Jaime Augusto Zobel de Ayala, chairman of Ayala Corp., the oldest conglomerate, even said the Philippines is way behind the curve.

Ayala Corp.’s Bank of the Philippine Islands is among the country’s top lenders.

“Interest rates, I believe, need for rise. We’ve been expecting it for some time now. In fact, we’re way behind the curve. We were expecting it to rise much earlier. Our currency has shown a little bit of weakness in relative terms versus other countries…. We believe there has to be movement upward in interest rates,” Zobel said in a press conference after the company’s annual stockholders’ meeting.

Zobel said the conglomerate is in a good position to handle higher rates given its strong balance sheet, adding that they are constantly running scenarios of what a change in interest rate environment could do.

Ayala Corp. chief finance officer TG Limcaoco said some of the company’s debts have fixed rate bonds with maturities of four to five years, which he said are long enough.

The conglomerate’s property and mall developer Ayala Land Inc. (ALI) is ready to make some adjustments to take into account higher interest rates.

“We’re starting to adjust our plans to reflect rising interest rates,” ALI president and CEO Bernard Vincent Dy said.

San Miguel Corp. president and COO Ramon Ang said the diversified conglomerate is likewise ready for higher interest rates which would mean an increase in borrowing costs.

“San Miguel Group is ready for higher interest rates. San Miguel is undergeared,” Ang told reporters recently.

Even San Miguel’s foreign debt is already well-refinanced, added SMC chief finance officer and treasurer Ferdinand Constantino.

“(Our foreign debt is) only about 24 percent of total (outstanding debt),” he said.

Nevertheless, SMC may refinance more debt amid the weakening of the peso against the dollar.

Metro Pacific Investments Corp. (MPIC), the infrastructure and tollways conglomerate chaired by tycoon Manuel V. Pangilinan, is likewise unfazed by higher interest rates.

“We are mainly long-term — 10 to 15 years - fixed rate borrowers and we have great support from the local banks for our projects,” MPIC chief finance officer David Nicol told The STAR.

But, Nicol said big-ticket infrastructure projects in the country should really get moving so proponents could lock in their loans and minimize borrowing costs.

“The race is really to get the rights of way secured so that construction can move and related new loan draw down can be made and hence interest fixing can be locked in,” Nicol said.

The Bangko Sentral ng Pilipinas said it is satisfied with its current policy actions despite rising inflation and falling stock market prices. The BSP kept interest rates steady at its last policy meeting in March, but some economists expect monetary authorities to raise rates in their next meeting on May 10.

“In my view, the sum of BSP actions remains appropriate for the situation,” BSP Governor Nestor Espenilla said on Friday.