CyberWorks Shares Surge on Hopes C&W Found a Buyer (Update3)
By Cathy Chan
Hong Kong, Jan. 19 (Bloomberg) -- Pacific Century CyberWorks Ltd. shares posted their biggest two-day gain in a year on speculation Cable & Wireless Plc found a buyer for its 14.9 percent stake in Richard Li's telecommunications company.
Finding a buyer now would relieve investor concern that the U.K. telephone company will sell the shares on the open market, further depressing CyberWorks' share price after an 80 percent slump last year. The two-day, 19 percent gain was also driven by the conclusion of two separate syndicated loans for CyberWorks.
Hong Kong's biggest telecommunications company, which declined to comment on the speculation, has been trying to help C&W sell its stake to a strategic investor before Feb. 17, when the U.K. telephone company is free to sell half of the stake. The rest of the stake can be sold after August.
``Having this matter resolved will definitely boost the overall share price,'' said Vincent Koo, chief investment officer at Polaris Asset Management Ltd. He said investors will ``still be cautious'' about its interest payment costs.
CyberWorks rose 8.8 percent to HK$4.625, extending yesterday's 9.7 surge yesterday. It is the largest two-day gain since December 28, 1999. The stock had its busiest day of trading since Nov. 5 as 158 million shares changed hands, almost double the three-month daily average. The stock rally also came after CyberWorks signed formal agreements with banks totaling $6.2 billion.
C&W still held a fifth of CyberWorks on Aug. 17 as partial payment for its controlling stake in Hong Kong's dominant phone company, Cable & Wireless HKT Ltd. It then sold 4.9 percent of CyberWorks last September, raising HK$10.3 billion ($1.3 billion) The U.K. phone company still owns 3.26 billion CyberWorks shares.
Cable & Wireless's spokesman Peter Eustace declined to comment on the imminent sale. ``That's a rumor running in Hong Kong and we don't' comment on rumors,'' he said.
Speculation
Some traders are speculating that ``CyberWorks has already secured the sale,'' said Voon San Lai, an analyst at G.K. Goh Securities Ltd.
Rebecca Leung, a CyberWorks spokeswoman, declined to comment and C&W cannot be reached for comment.
The company's shares were also battered by a global slide in telecom stocks and lingering concerns about its high interest cost burden.
Next month, CyberWorks is due to repay a $9 billion loan that it used to buy HKT last year. It is currently paying 115 basis points more than the London interbank offered rate on the existing $9 billion loan which, together with fees, means monthly interest payments of about $53 million.
The company signed an agreement today to borrow $4.7 billion from banks to refinance the bridging loan after it promised to pay more interest, ending months of negotiations, bankers arranging the credit said.
CyberWorks and Telstra Corp., Australia's biggest telecommunication company, also secured its $1.5 billion in debt funding with eight banks for their equally-owned IP Backbone Co, said Telstra finance spokeswoman Megan Lane.
Loans
Banks were reluctant to loan the Internet infrastructure company the $2 billion it wanted, prompting it to accept the lesser amount. The company also accepted a higher interest rate.
``This ($1.5 billion) is now available to draw from,'' Lane said in an interview. She said ``a couple'' of additional banks were considering entering the lending consortium, which would reduce each bank's contribution.
Some investors said CyberWorks shares are rising in part because of speculation that Richard Li's father, billionaire property tycoon Li Ka-shing, may use his own money to buy part of C&W's stake.
Such a sale would pose regulatory concern because the elder Li is chairman of Hutchison Whampoa Ltd., the city's largest conglomerate, which controls Hutchison Telecom Co., the city's second-biggest phone company. Regulators would be likely to criticize such a move as anti-competitive.
``It would be problematic but not impossible'' as CyberWorks' fixed line business would be a perfect complement to mobile operation of Hutchison, said Nigel Coe, a telecom analyst at Deustche Bank in Hong Kong.
Traders said hopes for a cash infusion from the elder Li were fueled by a public lunch held by father and son yesterday at the Shangri-La Hotel. Li Ka-Shing previously bankrolled his son's creation of Satellite Television Asian Region Ltd., and Hutchison also owns a stake in a CyberWorks property project in Tokyo.
Coe also said ``it might make sense'' for China Telecommunications Corp. to invest into CyberWorks since it could smooth the initial share sale of the nation's biggest fixed-line operator slated later this year.
``They might try to get some international flavor for the IPO,'' Coe said.
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