Wonder what they will do with the money?>.
China Telecom Plans $500 Million Bond Sale
on October 20
By Aaron Sheldrick at Bloomberg News
28 September 1999
China Telecom (Hong Kong) Ltd., the only publicly listed
company that owns cellular telephone networks in China,
plans to sell bonds for the first time, starting October 20,
people familiar with the transaction said.
The company aims to sell $500 million of 10-year bonds priced
to yield about 2.2%age points more than U.S. Treasuries with
a similar maturity, the people said.
Company officials at China Telecom - a Hong Kong listed
company controlled by China's Ministry of Information
Industry - said financing plans are not "concrete" and
declined further comment.
Any sale by China Telecom - which needs about $3 billion to
make acquisitions in each of three provinces where it doesn't
already own networks - will be closely watched by money
managers and other Hong Kong and Chinese companies.
They will also be looking at the level of government support
for the company in its first ever attempt to borrow funds from
abroad.
"It would be a prime issue for China. The role of the
authorities in guaranteeing the issue, or not, as the case may
be would also be critical in terms of its acceptance" said
Christopher Tinker, head of Asian fixed-income research at
Credit Lyonnais SA in Hong Kong.
A price of 2.2%age points more than U.S. Treasuries would
value the bonds close to the rate of China's government
bonds. China's 10-year U.S. dollar government bonds now
yield about 1.9%age points more than U.S. Treasuries.
Traders said China Telecom may have to pay more, probably a
premium of between 2.6 and 2.75%age points over U.S.
Treasury bonds, to reflect the lesser status of the borrower.
"If you wander down below the government level - it's the
government, China Development Bank, Bank of China and
Citic (China International Trust & Investment Corp.) - beyond
that you're on your own," said Steve Taran, managing
director, global head of sovereign research at Salomon Smith
Barney.
That said, "we are more interested in the absolute yield than
the premium to the sovereign," said Dominique Audin, a
senior portfolio manager at Equitilink Ltd., which manages
about $750 million in Asian bonds.
Still, while some investors may balk at this price, portfolio
managers said the company's bonds would likely be a staple in
any regional fixed-income portfolio because of the company's
size and its dominance in China's mobile telephone industry.
China Telecom has the third-highest weighting in Hong
Kong's Hang Seng Index, accounting for 10.5% of the
benchmark measure. It's the No. 1 cellular provider in the three
provinces where it already has networks.
Merrill Lynch & Co. and Chase Manhattan Corp. are arranging
the sale. The company may hire an additional two banks to
help sell the securities, bankers said.
China Telecom is also preparing a sale of up to $2 billion worth
of new shares, arranged by Goldman, Sachs & Co. and China
International Capital Corp., people familiar with that sale said.
That transaction, which was first scheduled to coincide with
the bonds sale, will probably be postponed until next year
because of other similar sales scheduled to come at the same
time.
Copyright 1999, Bloomberg L.P. All Rights Reserved.
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