C&W eyes $1.5 bln via CyberWorks
By Vivian Chu, CBS.MarketWatch.com
Last Update: 4:44 AM ET Apr 2, 2001
HONG KONG (CBS.MW) - British telecom giant Cable & Wireless is aiming to raise $1.5 billion by selling its 14.7 percent stake in beleaguered Hong Kong Internet and telecom company Pacific Century CyberWorks through a convertible bond issue.
The bonds will carry a zero coupon rate and be exchangeable for C&W's entire 14.7 percent holding of CyberWorks' ordinary shares. A minimum exchange price of 3.60 Hong Kong dollars (46 cents) has been set. If not exchanged, the bonds will be redeemed at par on June 9, 2003. Final terms of the bonds will be announced on or before April 3, C&W said in a statement Monday.
The bonds have been rated single-A2 by Moody's and single-A by Standard & Poor's. Sale of the bonds is expected to be finished on or before April 12.
C&W (UK:CW: news, alerts) is the second largest shareholder in CyberWorks (PCW: news, msgs, alerts) , Hong Kong's leading telecom firm. Hong Kong tycoon Richard Li founded CyberWorks after acquiring Cable & Wireless HKT from its U.K. parent in Asia's biggest takeover last August.
As a result of the takeover, C&W received a 20.2 percent stake in CyberWorks that it could sell over time subject to the expiry of several lock-up periods. Last September, C&W sold a 4.9 percent stake in CyberWorks for 10.3 billion Hong Kong dollars ($1.3 billion), which caused CyberWorks' share price to plummet almost 20 percent in the following days.
CyberWorks asked that its shares be suspended from trading on Monday ahead of C&W's announcement this afternoon. Last Friday, they sank 5.4 percent to 3.075 Hong Kong dollars. Trading is expected to resume tomorrow.
In London, shares of C&W rose as high as 4 percent before giving most gains back to stand at 478.5 pence, up 0.7 percent
Since Monday's announcement was expected, it won't likely cause CyberWorks' shares to plunge like they did in September, said Ben Kwong, associate director at KGI Asia in Hong Kong. "This will help remove some of the uncertainty surrounding CyberWorks, since investors have always worried about C&W's direct placement of its CyberWorks shares," he said.
Moreover, since C&W is selling its stake through convertible bonds rather than a direct sale to the market, it won't rock CyberWorks share price like it did last time, he added.
C&W's announcement comes a week after CyberWorks posted a massive $886 million net loss for 2000 and negative shareholders equity of $1.8 billion, making it the first blue-chip Hong Kong company with a negative equity position.
Its share price has lost 80 percent of its value since acquiring HKT over concerns about the company's debt level, business prospects, and doubts about its Internet aspirations.
"In the short term, this news will help relieve some of the pressure on CyberWorks, but I doubt they will have much upside. It will continue to hold around the 3 dollar level," predicted Kwong.
Vivian Chu is a reporter for CBS.MarketWatch.com in Hong Kong.
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