PCCW faces high loan bill
By Joe Leahy in Hong Kong
Published: January 4 2001 20:08GMT | Last Updated: January 5 2001 09:34GMT
Pacific Century Cyberworks, the Hong Kong internet and telecommunications company, is to pay 35 to 65 basis points more in interest on a $4.7bn loan than previously planned.
The move, which comes amid increasing caution among global banks towards telecommunications debt, was necessary to ensure the facility was attractive to international banks, the co-ordinating arrangers of the loan said. PCCW's fixed line unit, Hong Kong Telecom (HKTC), is raising the debt.
The loan is part of PCCW's effort to refinance a $12bn bridge loan used to help pay for its takeover of C&W HKT.
"In view of the recent sentiment in relation to the telecommunications companies, and to assist the successful and early closing of the syndication of the loan facility, HKTC has agreed with the five co-ordinating arrangers to increase the interest margin of the facility," a statement released by the arrangers said.
Banks have become more wary about extending loans to telecoms companies following a series of warnings from regulators about over-exposure to the sector. Loans are taking longer to complete, and some banks are demanding higher returns.
The change in the pricing of the PCCW loan is a second blow to the company's efforts to raise debt finance. Last month, PCCW and Telstra Corp, Australia's dominant telecommunications company, were forced to cut by one quarter a separate $1.5bn loan they were raising for an internet infrastructure joint venture.
The moves have also demonstrated that Asia is not immune to trends affecting the telecoms sector elsewhere. Previously PCCW's bankers had argued the company would be able to secure better terms than its peers in Europe because financial institutions generally had lower exposure to the telecoms sector in Asia than elsewhere.
Under the new terms, PCCW will pay 85 basis points above the London interbank offered rate on the three-year, US$1.5bn tranche of the loan rather than 50 basis points as previously planned. It will also pay 115 basis points above Libor on the five-year, US$2.3bn portion of the loan compared with 65 basis points, and 145 basis points over Libor on the seven-year, US$900m tranche of the loan rather than 80 basis points.
"The increase in interest margin will ensure the facility is attractive to a broader international syndication group and will lead to a successful and early closing of the syndication," the banks said.
The co-ordinating arrangers of the loan are Barclays Capital Asia, BOCI Capital, Chase Manhattan Asia, Fuji (Mizuho Financial Group), and The Hongkong and Shanghai Banking Corporation.
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