Philippines gets lowest score in S&P insolvency review

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December 4, 2025 | 12:00am

MANILA, Philippines — The Philippines emerged in the lowest category in global ranking of insolvency regimes, with S&P Global Ratings citing weak protections for creditors and unpredictable outcomes when companies undergo rehabilitation or bankruptcy.

The global debt watcher classified the Philippines as a Group C jurisdiction based on its assessment released yesterday.

The classification does not affect the country’s existing credit ratings, S&P stressed.

“The Group C jurisdiction ranking assessment on the Philippines 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,” the credit rating agency said.

A jurisdiction ranking shows how well a country’s laws protect lenders and investors when a company can no longer pay its debts.

S&P said the ranking reflects “the relative degree of protection that a country’s insolvency laws and practices afford to creditors’ interests and of the predictability of those proceedings.”

S&P said the Philippines received a Group C ranking because creditors often have little clarity on how much they can recover when a borrower defaults.

The rating agency assessed the country’s creditor-friendliness as weak, pointing to limited real-world evidence that the country’s insolvency law, the Financial Rehabilitation and Insolvency Act of 2010, is consistently implemented.

S&P also noted that the degree of asset preservation is low, citing the absence of cases where creditors typically recover more than 30 percent of what they are owed.

It added that the time it takes to resolve insolvency cases varies widely, making it harder for lenders to estimate how much and how soon they can expect repayment.

Unlike other countries in the same group, the Philippines lacks enough documented cases to determine whether certain claims unfairly jump ahead of others during insolvency.

S&P described this part of its assessment as “inconclusive,” highlighting a broader lack of transparency and consistency in proceedings.

Because the Philippines falls under Group C, S&P said it would not assign recovery ratings to corporate issuers in the country.

Instead, it will rely on its standard method of assessing a company’s capital structure to determine how different creditors are ranked in case of default.

This means issue credit ratings for Philippine corporates will continue to be based on priority of claims, rather than estimated recovery outcomes.

Despite the weaknesses, S&P acknowledged positive aspects of the legal system. The Philippines’ framework generally supports reorganizing troubled companies rather than forcing liquidation, which can help preserve value and jobs.