Domestic credit rating agency Philippine Ratings Services Corp. (PhilRatings) gave the highest credit rating of "Aaa with stable outlook” to the P5 billion maiden bond offer of Converge ICT Solutions Inc., with an oversubscription option of up to P5 billion.

PRS gave the rating due to the internet provider’s "formidable position in the fixed broadband market following its spectacular growth in recent years and its strong cash flow that provided the company flexibility in its network rollout".

“Obligations rated PRS Aaa are of the highest quality with minimal credit risk," PhilRatings stated in its report.

"The obligor’s capacity to meet its financial commitment on the obligation is extremely strong.”

A stable outlook means the rating is likely to remain unchanged for the next twelve months.

The funds to be generated from the proposed bond issue would be used to support the company's expansion, according to Converge CEO Dennis Anthony Uy.

Converge aims to cover 55 per cent of Philippine households by 2023 as it already connected Visayas and Mindanao to its pure fiber national backbone earlier this year.

“We’re pleased that our prudent fiscal management, coupled with a strong operational performance, throughout the year has garnered us the highest credit grade from PhilRatings,” he noted.

“Gaining this seal of approval from Philratings signals that our debt papers pose minimal credit risk," says Converge President Maria Grace Uy.

"Our strong liquidity and market position should give confidence to potential investors.”

In giving the rating, the credit rating agency took stock of the company’s performance and external development in the ICT industry, particularly the epansion of its subscriber base and its strong standing in the fixed broadband market.

PRS also noted the company's cash flow generation and financial flexibility to support network expansion as well as its conservative debt management.

While Converge is relatively small in terms of asset size, it has acquired a strong footing in the fixed broadband market, according to PhilRatings.

Based on the total fixed wired broadband subscribers of the three companies, Converge cornered 30 percent of the total as of end-September 2021.

In a disclosure to the Philippine Stock Exchange last week, Converge announced its intent to issue Philippine-peso denominated fixed-rate bonds in the Philippine Dealing and Exchange Corp., an initial tranche of P 5 billion, with an oversubscription option of another P 5 billion.

The local bonds are expected to have a tenor of 5 years.

"We plan to use the proceeds from the planned bond issue to support our capital expenditures as we continuously grow and strengthen our pure fiber network,” Converge stated.

This will form part of the aggregate principal amount of P20 billion borrowing program of Converge, for which it has already filed for shelf registration to the Securities and Exchange Commission.