STI Education Services Group, Inc.’s (STI ESG) outstanding bond issuance of P3.0 billion has been assigned an issue credit rating of PRS A plus, with a Negative Outlook.

In a statement, Philippine Rating Services Corporation (PhilRatings) said this was changed from its previous rating of PRS Aa, with a Stable Outlook.

Obligations rated PRS A have favorable investment attributes and are considered as upper-medium grade obligations.

Although these obligations are somewhat more susceptible to the adverse effects of changes in economic conditions, the obligor’s capacity to meet its financial commitments on the obligation is still strong. 

A Negative Outlook indicates that there is a potential for the present credit rating to be downgraded in the next 12 months.

In changing the assigned rating, PhilRatings considered the relatively resilient demand for tertiary education, albeit with significantly increased competition brought about by the Universal Access to Quality Tertiary Education Act.

 It also factored-in STI ESG’s declining profitability due to lower enrollees and increasing expenses, largely attributed to depreciation and interest expenses, with net income significantly influenced by non-core items.

Also noted was the increasing economic uncertainty and the adverse impact of the community quarantine attributable to the COVID-19 pandemic on STI ESG’s business.

 To protect and promote the rights of students to quality education, the Philippine government implemented Republic Act (R.A.) No. 10931 or the Universal Access to Quality Tertiary Education Act, which started in School Year (SY) 2018-2019.

The free tuition law, however, affected the number of enrollees for STI ESG in its first year of implementation.

Further, the STI Network held the graduation of over 30,000 Grade 12 students who belonged to the first batch of SHS graduates under the K to 12 program at the end of SY 2017-2018.

 As such, STI ESG recorded lower number of students at 76,841 and 74,798 for SY 2018-2019 and SY2019-2020, respectively, from 96,531 students in the previous school year. For the ongoing school year, only 62,490 students have enrolled, mainly due to the ongoing COVID-19 pandemic.


Source: Manila Bulletin (https://mb.com.ph/2021/01/18/stis-bond-rating-changed/?utm_source=rss&utm_medium=rss&utm_campaign=stis-bond-rating-changed)