Price was now too unattractive
Saturday, July 21, 2001
PCCW scraps $19b bond deal
BEN KWOK
Embattled telecoms group Pacific Century CyberWorks has scrapped its latest multi-billion dollar money-raising deal.
The company announced last night it would abandon plans to raise US$2.5 billion (HK$19.5 billion) by selling 10-year bonds. The issue would have been the biggest of its kind in Asia, excluding Japan, and was aimed at raising cash to help pay off some of the company's US$4.7 billion debt.
The news is the latest blow to chairman Richard Li Tzar-kai's battered telecoms giant, which has already seen its share price plummet more than 92 per cent from its peak.
Last night, the company blamed volatile market conditions in Argentina and other emerging markets for the decision. The recent turmoil in these markets means investors are more wary of buying bonds anywhere, which in turn means they demand higher returns for the risk.
Over the past few days, sources say, the company has had to offer progressively higher sums to try to lure investors. Earlier yesterday, it was reported PCCW had cut the figure it planned to raise to only US$1 billion, and offered a bigger return - 325 basis points above US treasuries - to buyers.
But the company last night decided to scrap the deal, saying the price was now too unattractive.
PCCW stressed it had no immediate need to refinance its debt and would continue to evaluate and assess its refinancing options.
Talks between CyberWorks and financial adviser Morgan Stanley broke off at 8.30pm, ending a two-week effort to issue the company's first bond. Market sources blamed poor timing in the Morgan Stanley offering. The US investment bank had tried to push a deal when many potential investors were away for the summer, they said. They also claimed the investment bank had been inconsistent in its pricing.
No one at Morgan Stanley was available for comment.
Analysts were also critical of the way the deal was introduced to the market. One fixed-income investment banker said: "A US$1.5 billion deal would still have been a mega-bond transaction. Yet the deal will be seen as a failure because the group, in typical Richard Li style, came to market with brash plans to launch the biggest bond deal ever in Asia."
But other analysts said scrapping the issue at this stage was the right move. "Pulling out is right for shareholders and I do not take this too negatively," said Fan Jiang, head of Asian fixed-income research at Goldman Sachs. "I see no point in doing a deal over 300 [basis points over treasuries rates]."
BondsInAsia chief executive Albert Cobetto said: "They came to market announcing a very big transaction and then the market conditions got very volatile. It's a little more problematic to get finances done in telecoms and anything related to technology."
The Internet and telecom company ran up a debt of US$12 billion by taking over the former Cable & Wireless HKT.
But its share price collapsed right after the takeover. The counter has lost almost 58 per cent this year, making it the worst performer on the blue-chip index.
CyberWorks closed down 1.16 per cent yesterday, at HK$2.12, a decline of more than 92 per cent from its high of $28.50 last year, reflecting a loss of confidence by some investors in Mr Li.
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