CyberWorks, Telstra Raise Interest on $1.5 Bln Loan (Update2)
By Cathy Chan
Hong Kong, Jan. 9 (Bloomberg) -- Pacific Century CyberWorks Ltd. and Telstra Corp. agreed to pay $6.1 million more in interest to secure a $1.5 billion loan after lenders balked at earlier terms, banks arranging the credit said.
The Internet Protocol Backbone Co., an equally owned venture between Hong Kong's No. 1 Internet company and Australia's biggest telecommunications company, raised the rate by as much as 0.55 percentage point on the loan, Barclays Capital and J.P. Morgan Chase & Co. said.
The increase came after CyberWorks was forced to revise terms of a $4.7 billion loan borrowed by its telephone unit and raise the interest margin by as much as 0.65 percentage point to entice more banks to lend.
The increase for the smaller loan is designed to ensure banks lending money to CyberWorks did not receive a favorable rate above those advancing credit to the IP Backbone venture, said Paul Bartlett, co-head of credit origination at J.P. Morgan in Asia.
``The increase is to make sure some banks are not disadvantaged,'' Bartlett said.
CyberWorks and Telstra agreed to pay between 75 basis points and 135 basis points more than the London interbank offered rate, or Libor, on the loan.
The company originally offered to pay banks between 50 basis points and 80 basis points more than Libor for the loan which matures over three years, five years and seven years. Libor was last quoted at 5.616 percent for three-month borrowing.
Revised Terms
The revisions were similar to those on the larger $4.7 billion loan CyberWorks is raising to help repay a $9 billion credit it used to buy Cable & Wireless HKT Ltd.
CyberWorks would have to pay 300 basis points more than Libor had it decided to roll over the bridging loan at the end of February, Bartlett noted.
Had CyberWorks rolled over its bridging loan, banks would have had the ability to stop the venture with Telstra, announced last year, from starting operations, Bartlett said.
Six other banks including HSBC Holdings Plc, Rabobank, Sanwa Bank Ltd., and UBS Warburg, the investment banking arm of UBS AG, Citigroup Inc. and Credit Suisse Group have all committed to lend, the arrangers said in a statement.
Financing costs for telephone and Internet companies are rising after a more than $250 billion binge last year.
Reduced Target
The IP Backbone company, designed to function as a global carrier of voice, data and Web services, has already reduced the amount it targeted after banks expressed reluctance to lend to phone companies.
Telstra and CyberWorks already reduced the size of the loan from $2 billion in December.
Banks have become cautious in telecom-related lending after a global selloff in stocks and warnings from the Bank of England that rising debt of European and U.S. phone companies increases the risk of financial crisis.
The banks lending to the bigger $4.7 billion loan also won concessions by reducing the amount of dividends CyberWorks receives from the loan recipient Hong Kong Telephone to 35 percent from 75 percent should the phone firm's debt exceed 3.5 earnings before interest, tax, depreciation and amortization.
CyberWorks shares, which have fallen 66 percent the past year, rose 1 percent today to HK$4.92. Telstra, down 12 percent the past 12 months, fell 0.6 percent to A$6.73.
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