FOCUS-Brazilian gov't ends Telebras receipts saga
Reuters, Thursday, February 05, 1998 at 22:48
By James Craig
SAO PAULO, Feb 5 (Reuters) - Brazil's decision to convert subscription receipts of Telebras (SAO:TEL) into new shares of the federal telecommunications holding company ended an eight-year-old legal battle but was unlikely to move the market, analysts said Thursday.
"The impact will be zero. This was expected. People long ago factored it into the price," said Auro Rozenbaum, a telecommunications analyst with Deutsche Morgen Grenfell in Sao Paulo.
The Finance Ministry said Thursday the government, the majority shareholder in Telebras, favored turning the contested receipts, known as TEL5 (SAO:TEL_P.R), into 13.7 billion new preferred shares of the company.
In a statement, the ministry said the government would vote in favor of the capital increase at shareholder meeting to be held soon. No date had been set for that meeting.
The receipts were issued by Telebras in 1990 with an eye toward turning them into shares. But the conversion was strongly opposed by successive governments, which argued the original offer was flawed and took the matter to court.
Analysts warned that the failure to issue the promised shares would compromise trust in the government ahead of Telebras' multibillion-dollar privatization, slated to take place in June or July.
Last year, a high court judge finally ruled the issue was valid and could proceed.
But Communications Minister Sergio Motta called the subscription a "crime against the country," saying it would hurt Telebras shareholders by diluting existing Telebras equity by one percent and cost the country 1.2 billion reais.
Uncertainty over the subscription's fate caused volatility in local stock markets, where Telebras preferred is the benchmark issue. In the end, Motta relented.
On Thursday night, analysts said the conversion would dilute existing Telebras preferred shares by about four percent but the market months ago had factored that into the price.
The government's decision, they said, would be welcomed by receipt holders because it ended uncertainty and they would receive the more liquid share.
It also meant Telebras would make good on some $80 million to $100 million in unpaid dividends owed to receipt holders.
Still, Telebras' market price was not expected to move on the news, as the impact on company finances or equity is minimal, analysts said.
"If there is any impact, it will be because this soap opera is finally over," said Sergio Misima at Fator Securities.
Speculation ahead of the government's TEL5 decision drove the receipts' price up 5.46 percent Thursday to 120.01 reais in Sao Paulo. But the preferred share, the underlying stock for Telebras' American Depositary Receipt (ADR) (NYSE:TBR) in New York, closed off 1.32 percent to 127.20 reais, weighed down primarily by declines in U.S. equities.
Copyright 1998, Reuters News Service |
