Cable & Wireless to unload PCCW stake via bond issue
Embattled Internet and telecom firm Pacific Century Cyberworks said on Monday it had reached a deal with significant stakeholder Cable & Wireless Plc which it hoped would remove a huge overhang of shares from the market and help ease relentless pressure on its share price.
PCCW, whose shares have been battered by fears the British company would dump its holdings amid the global tech and telecom selloff, said it would help C&W unload its 14.7 percent stake in the firm through an exchangeable, zero-coupon bond issue.
If the deal is completed by April 12, PCCW will release Cable & Wireless from a lockup that forbids C&W from selling half of its stake in the firm before August. If not, the lockup for the second half of the stake will resume.
PCCW said in a statement that the bonds will be exchangeable for shares of the company covering the British telecom giant's entire stake.
C&W said in London that the exchange price will be set within a range of HK$3.60 to HK$3.80 (US$0.46-0.49), and that it expects proceeds from the issue to total about US$1.5 billion.
PCCW's shares closed on Friday at HK$3.075. Trading in the stock was suspended on Monday prior to the market opening pending the announcements.
The investment-grade bonds are targeted at institutional investors, PCCW Chairman Richard Li told a hastily called news conference. UBS Warburg is the lead manager of the C&W bond issue.
"This 15 percent will be spread to different big funds, not to any strategic investors," he said.
C&W, which sold control of the former Cable & Wireless HKT to PCCW last year in a US$28.5 billion deal, has been free to sell half its stake in PCCW since a lockup period lapsed in February, putting severe pressure on PCCW's stock price.
Li told reporters that the exchangeable bond deal was chosen because it would prevent C&W from dumping shares on the market.
He said it may cause further volatility in PCCW shares over the next few days, but "for the medium and long term would be a milestone," because it represents a clear plan for disposing of the C&W stake.
Waiting until the second lockup on C&W's shares in PCCW expired on August 21 would have dragged the overhang issue on too long.
Fear that the British telecoms giant would dump the shares onto the open market has weighed heavily on PCCW's share price along with concern over its debt levels and souring sentiment toward tech and telecom shares in general.
PCCW's shares have lost 39.11 percent of their value since the start of the year, and are far below the HK$28.50 reached in February 2000, which allowed the firm to buy the much larger Cable & Wireless HKT in Asia's largest-ever corporate takeover.
Li said the bond sale to institutional investors marked a change of direction for PCCW, which previously had been seeking a strategic partner, such as a telecom firm, to take over C&W's stake.
PCCW had failed to find such an investor, which many company watchers have said would have provided a welcome endorsement of the upstart company and its strategy.
Li said that in the end PCCW preferred the stake go to a stable base of institutional shareholders.
"At last, we decided if we seek one or more strategic investors, that would be postponing the issue of the overhang. After we got this idea, we changed direction," Li said.
Li also declined to say whether he personally would buy some of the C&W bonds.
"In the meantime, I have not studied the possibility because we just finalised the arrangement," Li said.
I HAVE JUST ONE THING TO SAY TO RICHARD ON THAT STATEMENT - GIVE ME A BREAK!
special.scmp.com |
