S&P Global Ratings has flagged persistent shortcomings in the Philippines’ insolvency framework, assigning the country a Group C jurisdiction ranking, the lowest tier in its global scale.
The designation underscores concerns about limited creditor protection and unpredictable outcomes in rehabilitation or bankruptcy cases.
The ranking carries no implications for the Philippines’ existing credit ratings, S&P said.
In its report, S&P said the evaluation “reflects the country’s overall weak legal framework for creditors. We assessed the Philippines’ creditor-friendliness as weak and the rule-of-law risk as high.”
S&P’s jurisdiction rankings measure how effectively a country’s laws safeguard lenders and investors when companies default. The agency said the score captures “the relative degree of protection that a country’s insolvency laws and practices afford to creditors’ interests and of the predictability of those proceedings.”
The Philippines’ placement in Group C stems from what S&P described as a lack of clarity on expected recoveries in insolvency situations.
The Financial Rehabilitation and Insolvency Act of 2010 provides the legal basis for such proceedings, but S&P noted that there is insufficient real-world evidence showing consistent implementation.
Asset preservation during insolvency also remains weak. S&P pointed out that there are no firm precedents of creditors recovering more than 30 percent of their claims, while the time needed to conclude cases varies significantly. These gaps, it said, make it difficult for lenders to anticipate both recovery values and the duration of legal processes.
S&P said the Philippines does not have enough documented cases to determine whether certain creditors routinely leapfrog others during the distribution of proceeds. This portion of the review was deemed “inconclusive,” adding to concerns about transparency and consistency.
With the Philippines positioned under Group C, S&P will no longer provide recovery ratings for corporate issuers in the country. Instead, the credit watcher will assess issue ratings solely on the priority of claims in a company’s capital structure, rather than estimated recovery levels.
S&P acknowledged areas where the Philippines’ legal framework offers support. The existing system generally favors reorganizing distressed companies instead of liquidating them outright, which can help maintain operations and preserve value.
