By JAMES A. LOYOLA
SL Agritech Corporation (SLAC), a leading producer of hybrid rice seeds and premium rice in the Philippines, is issuing ₱2 billion worth of commercial papers to pay for debt and for working capital.
“The proceeds will be used to pay the company’s short-term obligations, and to purchase rice and seed inventories from its contract growers,” said Philippine Rating Services Corporation (PhilRatings).
SL Agritech was assigned an issuer credit rating of PRS Aa (corp.), with a Stable Outlook, by PhilRatings in relation to the company’s commercial paper (CP) issuance.
An issuer credit rating is an opinion on the general and overall creditworthiness of the issuer, evaluating its ability to meet all its financial obligations within a time horizon of one year.
The focus is on financial strength and stability under normal and stressed conditions to be able to meet existing and prospective financial obligations.
A company rated PRS Aa (corp.) differs from the highest-rated corporates only to a small degree, and has a strong capacity to meet its financial commitments relative to that of other Philippine corporates.
In arriving at the rating, PhilRatings took into account the firm’s competitive market position locally, supported by proprietary technology and vertically integrated operations.
It also factored in SL Agritech’s potential growth, given the company’s international business expansion, and opportunities for growth for the local Hybrid Rice Industry given the enactment of the Rice Tariffication Law.
PhilRatings also took into consideration the company’s sustained profitability, albeit declining coverage ratios.
Although business generation remained largely domestically driven, SLAC continues to expand its network of customers abroad. Its hybrid seeds are exported to Vietnam, Myanmar, Indonesia and India.
Its rice products, on the other hand, are sent to Saudi Arabia, Bahrain, Jordan, Kuwait, Singapore, Australia, United Arab Emirates (UAE) and United States of America (USA).
In addition, the company has taken steps to expand the production of its hybrid rice seeds in neighboring countries such as Bangladesh, Myanmar, India and Indonesia, and which are reportedly four of the world’s largest rice producers.
For the next two years, SLAC expects growth to continue, mainly supported by its local operations.