The debt/EBITDA ratios reflect the cash available with the company to pay back its debts.

Despite having the highest concentration of debt held by its corporates versus its peers, the Philippines was viewed to withstand this risk, Moody’s Investors Service said on Monday.

“The Philippines has one of the highest concentrations of debt held by corporates with debt/EBITDA (earnings before interest, taxes, depreciation and amortizations) ratios of more than four,” Moody’s said.

“(This can be owed to) a small number of large conglomerates with complex organization structures, including multiple operating subsidiaries across industries and cross-holdings in corporates,” it added.

The debt/EBITDA ratios reflect the cash available with the company to pay back its debts. A higher number signifies that the company is heavily leveraged and might find difficulty to settle its obligations.

According to Moody’s, risks from such might manifest to a “group-level fallout,” which will definitely impact the local financial system.

“A default by a large conglomerate would have a significant impact on the banking system, although the likelihood of such an event occurring in 2019 to 2020 in our view is low because financial performances of these groups remain healthy,” the debt watcher explained.

Moreover, the Moody’s unit said that the slower economic growth witnessed for the year and was expected to continue until 2020, have weakened corporates’ debt repayment capabilities.

Also, the ongoing geopolitical tensions proved to contribute its share in the phenomenon.

In all, Moody’s viewed corporations in the country to be performing well, thus, offsetting the likelihood of such to go with default rates.

To recall, the Bangko Sentral ng Pilipinas have announced a reduction in its rates last week, both for its key interest and reserve requirement ratio levels.

Such move was expected to help bolster the economy as the local financial system now benefits to this increased peso liquidity.