Data center REIT seen as boon to PLDT balance sheet

MANILA, Philippines – CreditSights expects PLDT Inc.’s planned data center real estate investment trust (REIT) to improve its credit standing through debt reduction, despite potential offsets from dividend payouts.

In a report released after PLDT’s filing of the proposed Vitro REIT, the Fitch Solutions unit described the deal as “net credit positive,” citing the likely use of proceeds to repay debt.

READ: PLDT applies for P24.2-B data center REIT IPO

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PLDT chair Manuel V. Pangilinan earlier said the company aims to reduce its debt through the REIT initial public offering. As of end-March, the company’s consolidated net debt stood at P282.3 billion.

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PLDT plans to raise as much as P24.2 billion from the sale of up to 1.91 billion Vitro REIT shares, equivalent to about 49 percent of the company.

According to CreditSights, PLDT’s pro-forma net leverage, including lease liabilities, could improve by about 0.2 times to around 2.8 times following the transaction.

Net leverage measures a company debt relative to earnings and helps assess its ability to service obligations. Companies calculate net leverage by dividing net debt by earning before interest, taxes, depreciation and amortization (Ebitda).

Still, CreditSights said the REIT structure may dilute cash flows, as 90 percent of earnings must be distributed and nearly half of the vehicle will be publicly owned.

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The research firm, however, described the impact as “manageable.”

Despite its favorable view on the transaction, CreditSights maintained its “underperform” call on PLDT due to its weaker balance sheet, competitive pressures and growing dividend outflows.

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“PLDT’s resilient credit profile continues to be underpinned by its leading broadband and mobile market positions, declining mobile capex, and asset monetizations,” it said. “We however remain watchful of overly stiff competition and rising dividend outflows.”

READ: PLDT preps data center unit for $400-M REIT IPO by Q4

Meanwhile, this planned listing forms part of PLDT’s broader effort to monetize its assets.

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In the first quarter alone, the telecommunications giant generated P300 million to P400 million from asset sales, including properties in Cebu and Baguio. More than 200 assets remain available for disposal. /pai INQ