How Much Does it Cost to Get a Credit Rating?
How much does it cost to get a credit rating? In the Philippines, most prospective ratees still find the amount of rating fees quite steep. As my former boss would always say though, “There is a cost to doing something. There is also a cost to not doing something.”
In the Philippines, there are two basic types of credit ratings done. There is the issue credit rating (which is a rating for a particular debt issue) and the issuer credit rating (which is a rating for over-all creditworthiness).
For issue ratings, the fee charged is typically a certain percentage of the amount of debt to be raised and is also dependent on whether the debt issuance is short-term (will mature in a year or less) or long-term (will mature in a year or more). As of today (September 13, 2006), the fees are as follows:
Short-term: 1/20th of 1% of the amount applied for + applicable VAT, with a minimum fee of P200 thousand.
Long-term: 1/10th of 1% of the amount applied for + applicable VAT, with a minimum fee of P250 thousand. Long-term issuances are also subject to an annual monitoring fee for as long as the issue is outstanding.
For issuer credit ratings, quotes are given on a case-to-case basis,depending on the type of company to be rated, as well as the complexity of the business (e.g. conglomerate with several subsidiaries versus a 1-product company).
In assessing whether obtaining a credit rating would be good for your company, think about the flexibility it will bring. With a credit rating, you have the option of issuing debt to the public or obtaining a bank loan. Having that option can help your company negotiate for better interest rates with your bank. Imagine a situation wherein your company needs to borrow, say, P1 billion. For a P1 billion long-term issuance, you would need to pay a rating fee P1 million + 12% VAT. If you are able to shave off 1 percentage point from the interest rate that you pay though because you have a credit rating, how much would you save? That’s P10 million! The P1 million fee then doesn’t seem very large, does it?
Fees may change from time to time, so it is best to get in touch with PhilRatings in the Philippines to inquire about rating fees. You may visit their website at www.philratings.com