(UPDATE) Companies Spun Off From Brazil's Telebras Started Trading On
NYSE
Dow Jones Online News, Monday, November 16, 1998 at 14:44
NEW YORK -(Dow Jones)- American depositary receipts of 12 companies
spun off from Brazil's former telecommunications monopoly
Telecomunicacoes Brasileiras SA, or Telebras, began trading on the New
York Stock Exchange Monday.
Among the companies, ADRs of fixed wireline company Telesp
Participacoes SA (TSP) opened at $27.75, while Telesp Celular (TCP) ADRs
started trading at $21.375. Fixed-wireline company Tele Centro Sul
Participacoes SA (TCS) opened at $46; Tele Norte Leste (TNE) ADRs
debuted on the Big Board at $14; and long distance carrier Embratel
Participacoes SA (EMT) started at $16.50. Cellular firm Tele Sudeste
Celular (TSD), meanwhile, began trading at $22.
The ADRs are trading on a "when-issued" basis, until their
distribution, scheduled for Tuesday. Telebras (TBR) will trade
ex-spinoffs starting Wednesday.
Meanwhile, top government officials denied a magazine report that
said Communications Minister Luiz Carlos Mendonca de Barros and Andra
Lara Resende, president of the government-owned National Development
Bank, tried to influence the outcome of the auction.
The distribution of ADRs has been a source of confusion for many
investors. Telebras won't distribute odd lots, or fractional ADRs, which
will instead be cashed out. In the conversion schedule, only three
companies are on a one-to-one ratio with TBR, while the remaining eight
are converted on a fractional basis. For example, an investor holding
one Telebras ADR would get one ADR of Embratel Participacoes, but would
receive cash instead of the 0.02 ADRs due of Tele Leste Celular
Participacoes SA (TBE).
Telebras options will be settled with ADRs of the new spinoffs, the
Options Clearing Corporation said Friday. OCC vice president John
Peplinski said the deliverables for a Telebras option will include 12
new ADRs, plus the TBR stub and a small cash settlement in lieu of a
fractional ADR.
Investors who don't want a dozen ADRs have two options: HOLDRs (TBH)
are a basket security that represents ADRs of Telebras. RTBs are another
ADR instrument that represents a Telebras basket security traded
locally.
Fund managers welcomed the NYSE listing, which comes almost two
months after the separate telecom companies started trading on the Sao
Paulo stock exchange. BEA Associates fund manager Guillermo MacLean
Friday said the New York trading would deepen the market in the
individual companies. He added that HOLDRs are still "extremely
attractive."
Robert Salvy, who manages about $2 billion in Latin American assets
for Shroder Capital Management International agreed. "We'll be able to
choose the fastest growing of the receipts," Salvy said. "And it should
mean greater liquidity."
Brazil's privatization of the 12 operating units of Telebras was the
largest such sale in Latin American history. Prices in the July auction
topped the government's minimum price of $11.51 billion by 64%. MCI
Communications Corp., Telefonica S.A. and Portugal Telecom S.A. came up
big winners in the sale of controlling stakes in units spun off from
Telebras.
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