ABS-CBN Outstanding PhP6B Bond Issuance Maintains Highest Credit Rating

Quezon City—(PHStocks)—The credit rating of the P6.0-billion bond issuance of ABS-CBN Corp. (PSE: ABS) was maintained at PRS Aaa by Philippine Rating Services Corp. (PhilRatings). The bonds are due on 10 February 2021 and carry an interest rate of 5.3350%.

Obligations rated PRS Aaa, the highest rating assigned by PhilRatings, are of the highest quality with minimal credit risk. The obligor’s capacity to meet its financial commitment on the obligation is extremely strong.

The rating was maintained due to the following: (1) continued production of hit programs and development and retention of a popular talent pool, enabling the company to dominate nationwide ratings; (2) substantial experience and track record of management and key officers who keep up with new trends; (3) sustained profitability; and (4) sustained ample coverage for interest and principal payments.

The rating is based on available information and projections made at the time of the rating review. PhilRatings shall continuously monitor developments relating to ABS-CBN and may change the rating at any time, should circumstances warrant a change.

ABS-CBN was incorporated in 1946 and its common shares have been listed on the Philippine Stock Exchange (PSE) since 1992. ABS-CBN is mainly in the business of television and radio broadcasting, and cable and direct-to-home (DTH) television distribution. The company also has operations in the following related businesses: movie production, audio recording and distribution, video/audio post production, and film distribution. It is also into internet and mobile services, merchandising, and publishing. Some known and well-established brands under the company include: SKYCable, The Filipino Channel (TFC), Star Cinema, Star Records, ABS-CBNmobile, and TVplus.

In terms of nationwide ratings, ABS-CBN ranks number one in the Philippines. For the period January to December 2014, ABS-CBN had the Top 10 Programs in the Philippines in terms of ratings. The company also led in audience share for the whole country based on data provided by Kantar Media.

The company also continues to produce hit movies through its subsidiary, Star Cinema. The five top-grossing locally-made films for 2014, not including movies which entered the Metro Manila Film Festival (MMFF), were all from Star Cinema. These included Starting Over Again, Bride for Rent, She’s Dating the Gangster, Maybe This Time, and Da Possessed. These five movies grossed an estimated total of over PhP1.2 billion in box office sales and also reportedly did well overseas.

In terms of television and movie talent pool, ABS-CBN is perceived to have better-known and more popular talents. It is also more successful in building newcomers into well-known and popular talents compared to other networks.

As attested by the popularity of its programs, management is well-attuned to the needs of the mass market. It is also constantly in contact with the market through surveys and focus group discussions. Management also keeps pace with new trends in technology and media. Some of its initiatives and innovations include the launching of Digital Terrestrial Television through ABS-CBN TVplus, also known as the Mahiwagang Black Box, and its network sharing agreement with Globe Telecom, Inc. (Globe) to offer ABS-CBNmobile.

The company announced the implementation of a new pricing scheme for advertisers starting May 2015. ABS-CBN plans to use the cost per individual rating point (CPIRP) system. While the company is the first broadcaster in the country to use it, the Philippines is one of the last countries in Southeast Asia to do so. The previous pricing model used by ABS-CBN involved charging fixed prices for advertisers. With the CPIRP pricing model, advertisers will be charged depending on the actual rating of the show.

In the first quarter of 2015, the company was able to increase its consolidated revenues year-on-year by 2.4%, from PhP8.19 billion to PhP8.39 billion, backed by a steady increase in advertising revenues, continued contribution of SkyCable and sales of ABS-CBN TV plus and ABS-CBN Mobile. On the other hand, growth in expenses was at 2.8%. These, along with a drop in finance costs and other expenses, enabled net income to grow by 5.8% year-on-year, from PhP538 million to PhP569 million.

The company continues to maintain a healthy level of cash in relation to its current obligations, with current ratio standing at 1.9x as of end March 2015. Cash flows in relation to debt servicing continue to be strong as well.

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