RATING NEWS October 7, 2020 The Pioneer Domestic Credit Rating Agency

PhilRatings Maintains Highest Rating for JG Summit’s Outstanding P5.5 Billion Bonds

Philippine Rating Services Corporation (PhilRatings) has maintained its Issue Credit Rating of PRS Aaa, with a Stable Outlook, for JG Summit Holdings, Inc.’s (JGSHI) outstanding Fixed-Rate Bonds, in the total amount of P5.5 Billion.

Obligations rated PRS Aaa are of the highest quality with minimal credit risk. The obligor’s capacity to meet its financial commitment on the obligation is extremely strong. PRS Aaa is the highest rating assigned by PhilRatings.

An Outlook, on the other hand, is an indication as to the possible direction of any rating change within a one year period, and serves as a further refinement to the assigned credit rating for the guidance of investors, regulators, and the general public. A Stable Outlook is assigned when a rating is likely to be maintained or to remain unchanged in the next 12 months.

The assigned issue rating considered JGSHI’s: (1) strong liquidity; (2) sound capital structure; (3) strong and well- experienced shareholders and management; and (3) expectations that the JG Summit Group’s diversified portfolio of core businesses with solid market position, a continued focus on consumer needs, and digital initiatives will allow the Group to weather and adapt to the disruptions due to the ongoing community quarantine and COVID-19 pandemic. Moving forward, the Group is anticipated to benefit as the economy gradually opens up and recovers.

PhilRatings’ ratings are based on available information and projections at the time that the rating review was performed. PhilRatings shall continuously monitor developments relating to JGSHI and may change the rating and Outlook at any time, should circumstances warrant a change.

JGSHI is the holding company for a group of companies with sizable business interests in foods, agro-industrial and commodities, real estate and hotels, air transportation, banking, and petrochemicals. These companies include: Corporation (URC), one of the leading food and beverage (F&B) companies in Southeast Asia and Oceania; Robinsons Land Corporation (RLC), one of the ’ leading property developers based on revenues, number of projects and total project size; (CEB), the Philippines’ leading airline, and one of the fastest growing low-cost carriers (LCCs) in the world pre-COVID-19 pandemic; JG Summit Petrochemical Corporation (JGSPC), the largest manufacturer of polyolefins in the Philippines; JG Summit Olefins Corporation (JGSOC), the operator of the first and only naphtha cracker plant in the Philippines; and Corporation (RBC), the Philippines’ 18th largest bank based on assets. Furthermore, the company has core investments in telecommunications, and power generation and distribution.

Liquidity was healthy in 2018 and 2019, with current ratios at 0.9x and 1.0x for 2018 and 2019, respectively. Operating cash will continue to be positive, with ending cash and cash equivalents for 2020 and 2021 amply covering outstanding short-term debt at the end of the period. Historically, fund-raising exercises of the Group, via debt or equity, have been successful. In July 2020, JGSHI raised US$600 million from an offshore bond offering, marking the largest ten-year bond deal in the Philippines since 2013. As for its core businesses, RLC successfully raised P13.2 billion from the issuance of fixed rate bonds due 2023 and 2025.

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Capital structure remained sound, with debt-to-equity ratio (DE) ratio kept at 0.7x since 2015. Going forward, forecast leverage ratios will be close to historical numbers. Projected share of debt to capitalization will increase in 2020 mainly due to the aforementioned bond issuances, but the figure will improve in 2021.

The company’s strong and well-experienced management will be an advantage, amid an environment which faces significant challenges in relation to the ongoing community quarantine and COVID-19 pandemic. During the Asian Financial Crisis in 1997, JGSHI launched CEB, which was the leading Philippine domestic carrier before the current pandemic. In 1993, JSGHI also completed its initial public offering (IPO), and issued its ten-year US$300 million convertible bond. This bond, along with the proceeds of the IPO, funded JGSHI’s growth amidst the turbulent nineties and the Asian Financial Crisis (AFC). During the Global Financial Crisis in 2008, the Group incurred a net loss of P586 million. JGSHI, however, was able to quickly recover with a net income of P11.77 billion and P20.91 billion in 2009 and 2010, respectively. Before the COVID-19 pandemic, the company recorded net income figures amounting to P27.9 billion and P42.7 billion in 2018 and 2019, respectively.1

1 Net income/loss figures stated include the share of non-controlling interests of JG Summit’ subsidiaries

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