Tech Center: CyberWorks Scraps Its Plan For Long-Term Bond Offer
July 19, 2001
A WALL STREET JOURNAL News Roundup
Pacific Century CyberWorks Ltd. has scrapped plans for a 30-year bond and has instead opted for a 10-year issue, according to investors and people familiar with the situation.
The decision indicates a lack of interest in long-term debt from the Hong Kong telecommunications and Internet company amid a recent surge in supply of Asian high-grade bonds, the Argentine debt crisis and negative sentiment related to CyberWorks' depressed share price, analysts say.
CyberWorks Chairman Richard Li told reporters in Hong Kong that the company and its bankers haven't set the size of the bond issue, which the market expects will range between US$2.5 billion and US$3.8 billion. The deal is set to close Friday in New York, with pricing still to be finalized.
"Although the demand is there for a large issue, we may not fulfill that demand," Mr. Li said. Even at US$2.5 billion, the deal would be the biggest corporate bond from Asia outside of Japan.
According to investors, the underwriters gave price guidance, based on meetings between PCCW and its bankers, indicating the bond would be priced at about 3.125 percentage points over the benchmark 10-year U.S. Treasury note, which currently yields around 5.2%.
"Investor feedback has all been focused on the 10-year, obviously given the extremely volatile market, what with Argentina's problems," a person familiar with the situation said.
Paying "over or below 300 basis points [3 percentage points] is not the biggest problem. The problem is that we have to balance the interest payable annually," Mr. Li said.
CyberWorks shares, battered since early last year when the company bought Hong Kong's dominant telecom operator for US$28.5 billion in cash and stock, briefly rose 1.2% after Mr. Li hinted the company was scrapping the 30-year bond, but closed unchanged at 2.15 Hong Kong dollars (28 U.S. cents).
PCCW plans to use proceeds from the offering to partly refinance some US$4.7 billion in bank loans that have to be repaid by 2003, 2005 and 2007.
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