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Technology Stocks : PCW - Pacific Century CyberWorks Limited

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To: ms.smartest.person who wrote (1596)	7/12/2001 12:03:07 PM
From: ms.smartest.person	Read Replies (1) of 2248

PCCW Interest Bill May Rise 16% This Year If Bonds Issued at T+280: Merrill Jul 12, 2001 - 16:31:52 HKT Quamnet News Service Merrill Lynch said it expects Pacific Century CyberWorks (0008) to pay 11-16 percent and 24-37 percent more interest expense in full-year 2001 and 2002 if its planned issue of bonds is priced at 280 basis points above the treasury bond yield. PCCW's fixed line unit PCCW-HKT is seeking to issue long-term bonds of US$2.5-3.8 billion to partly refinance its US$4.7 billion syndicated loan, due in three to seven years. In a note to clients today, analysts Agnes Ho, Alistair Scott, Francis Cheung and Patrick Russel said the bonds could be priced in the range 10-year T + 260-300 basis points, 330-370 basis points higher than the current interest rate at LIBOR + 111 basis points, based on indications from the credit markets, with a Baa1/BBB credit rating on PCCW-HKT. The house said it believed the management intends to extend the maturity of the loan and to lock in a fixed rate in the current low interest environment. "PCCW could still be bounded by the restrictive covenants on the remaining balance of the US$4.7 billion syndicated loan, although it could re-negotiate the terms post-deal," it said. On the house's estimates, the impact of the higher interest on EPS (earnings per share) would be 10-15 percent for full-year 2001 and 13-20 percent for full-year 2002. Interest coverage on PCCW-HKT will drop to 3.5-4 times from about 5 times, still above the minimum required by debt covenants, it added. The house has a Neutral rating on the stock. Its EPS estimates are 12 HK cents and 19 HK cents respectively for full-year 2001 and 2002.

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