CyberWorks May Raise Up to $3.8 Billion in Bond Sale (Update6)
By Kate Linebaugh and Cathy Chan
Hong Kong, July 9 (Bloomberg) -- Pacific Century CyberWorks Ltd., which started marketing $2.5 billion of bonds today, told investors the company may raise as much as $3.8 billion as it seeks to extend the maturity of part of its existing debt.
Hong Kong's biggest phone company met investors at the territory's Conrad Hotel to sell 10-year and 30-year bonds. CyberWorks executive Roy Wilson told fund managers the new target depends on demand and market conditions, said Isaac Lo, a fixed- income fund manager at Friends Ivory Sime & Asia Ltd., which helps manage funds for Dao Heng Fund Management.
The company is seeking to sell bonds amid heightened investor concerns about telecommunications companies and rising yields on bonds sold by Asian companies. The sale may be Asia's biggest debt sale this year.
``The credit itself is well-known,'' said Sean Chang, a fund manager at Invesco Asia Ltd., which helps manage $11 billion of fixed-income funds globally. ``Its stock is not doing so good, which is going to have some impact on the debt (sale).''
Since the beginning of the year, CyberWorks' shares have lost more than half of their value, as investors lowered their expectations of the growth prospects of telecommunications and technology companies. The Bloomberg Europe Telecommunication Services Index has fallen 52 percent this year.
Rising Yields
Asian bond yields rose the past week, investors said. Malaysia's $1 billion bond maturing 2011 is yielding 260 basis points more than the U.S. Treasuries of comparable maturity up from 228.8 basis points when the country sold the debt at the end of June, investors said.
``Overall the sentiment isn't great,'' said Ben Yuen, a fixed- income fund manager who helps manage $500 million for CMG First State Investments (Asia) Ltd. CyberWorks may have to offer investors ``a higher spread requirement to look at the paper.''
CyberWorks' telephone unit, now known as PCCW-HKT Telephone Ltd., last week received an investment grade ``Baa1'' rating by Moody's Investors Service, three notches above a junk rating, and ``BBB'' by Standard & Poor's, two notches above non-investment grade.
Borrowers typically pay less interest the higher their credit rating. Having an investment grade rating also widens the net of potential investors as some are not allowed to buy junk debt. S&P rated the bonds ``BBB'' today.
If the company's rating is downgraded, it will pay 25 basis points more for each notch, according to the sale document. Investors expect the company to sell the bonds at more than 250 basis points more than comparable U.S. Treasuries.
Refinancing
The proceeds of the sale will be used to repay some of its $4.7 billion of existing debt and extend its obligations, giving it time to return to profitability. It had losses of $886 million last year as its investments in Internet ventures soured.
Last week, CyberWorks fired 340 Internet employees and said it would cut planned spending on Web consumer services in a bid to stop the losses.
Revenue from its fixed-line business, which contributed more than three-quarters of the company's turnover, isn't faring so well either. It fell 2.1 percent to HK$15.6 billion in the year to March due to a 26 percent decline in long-distance calls, increased competition and falling charges, according to the company's sale document.
The local call business' revenue rose 8 percent in the same period to HK$7.3 billion. Revenue growth however is expected to slow to 5.1 percent next year and 2.7 percent in 2003, according to research by J.P. Morgan Chase & Co., which is helping to manage the sale.
CyberWorks founder Richard Li, son of Hong Kong billionaire Li Ka-shing, said in May he expected phone services sales to be flat or shrink this year.
The telephone unit also said it is trying to borrow HK$2 billion for working capital to add to the HK$1.6 billion of cash it held at the end of March, the sale document said.
Morgan Stanley Dean Witter & Co. Barclays Capital Group, and HSBC Holdings Plc, are also managing the sale.
CyberWorks shares which fell as much as 5.3 percent today, declined 1 percent to HK$2.35. |
