BDO Leasing to issue P15 B commercial papers

MANILA, Philippines — BDO Leasing and Finance Inc., a unit of tycoon Henry Sy’s BDO Group,  will issue P15 billion worth of commercial papers.

Local credit watcher Philippine Rating Services Corp. gave BDO Leasing an issuer credit rating of  PRS Aa minus (corp.), which indicates its strong ability to meet all its financial obligations.

 BDOLF is recognized as one of the leading players in the commercial leasing industry, directly competing with other financing companies affiliated with top Philippine banks and other financial services firms.

Its leasing activities include the  lease of equipment and real properties while its financing activities involve the borrowing and relending of funds. 

Like most financing companies in the Philippines, BDOLF does not have a license to engage in quasi-banking functions. This precludes the company from taking deposits and incurring debt from more than 19 lenders, at any one time. 

In assigning the rating, PhilRatings considered BDOLF’s strong brand recognition due to its  close strategic relationship with its parent bank; the slowdown in its asset expansion, coupled with the increase in its past due accounts; the continued compression in margins; and the tempered growth outlook for the domestic economy, as well as rising interest rates which may dampen the demand for leasing and financing.

The rating was also assigned a stable outlook. This means  the assigned issuer credit rating is likely to remain unchanged in the next 12 months.

As of end of  2017, BDO owned about 88 percent of BDOLF’s common shares. 

“BDOLF has benefited from the BDO Group’s extensive market reach and well-established presence throughout the country in terms of marketing referrals, as well as the strong franchise of the group,” PhilRatings said.

The company’s  leasing and financing portfolio stood at P34.3billion as of  the end of 2017, up 9.4 percent year on year. This represents a slowdown in growth from 14.3 percent  in 2016.

As of the end of September, the size of BDOLF’s  portfolio slightly increased to P34.6 billion while total assets stood at P42 billion.

Past due accounts, on the other hand, grew significantly by 58.5 percent to P948.7 million last year and further by 23.4 percent to about P1.2 billion by the end of the third quarter.

The company’s bills payable remains as its primary source of funding, accounting for P30.5 billion or 81.5 percent of total liabilities as of the end of last year.

Outstanding bills payable declined to P29.6 billion as the company moved to reduce its borrowings that had higher interest rates.

“Going forward, BDOLF expects to continue expanding its business revenues. Increases in operating expense, however, will result in the possible continued compression of margins and bottom line results. Rising interest rates and higher taxes and licenses may have a dampening effect on the demand for credit,” PhilRatings said.