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Technology Stocks : PCW - Pacific Century CyberWorks Limited
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To: ms.smartest.person who wrote (1715)7/24/2001 4:11:59 PM
From: ms.smartest.person  Read Replies (1) of 2248
 
[7/6/01] PCCW basks in glow of new ratings
By GLENDA KORPORAAL
06Jul01

TELSTRA'S Hong Kong-based partner Pacific Century CyberWorks is expected to refinance its expensive debt load after the receipt this week of investment grade ratings from Moody's and Standard & Poor's.

With almost $10 billion in bank debt as a result of last year's $50 billion takeover of Hong Kong Telecom, PCCW is expected to announce a bond issue of as much as $6 billion following the new ratings.

With interest payments representing almost 25 per cent of its operating income, PCCW is expected to move quickly to take advantage of the fall in world interest rates since its original bank financing deals.

PCCW finance director David Prince said this week that the investment grade ratings "open up opportunities to refinance" its bank debt, which was spread in tranches from three to seven years.

PCCW executive chairman Richard Li said ratings of Baa1 from Moody's and BBB from Standard & Poor's showed the agencies "fully endorsed" the company's new cheaper internet services strategy announced this week.

However, the ratings were given to the company's profitable telephone operations, PCCW-HKT, not its loss-making internet business. Moody's also noted the phone company's debt levels were "relatively high for a fixed line provider".

Both noted that the ratings were based on the strong profits of the phone company and management promises not to use the phone company's earnings for high-risk ventures such as takeovers.

In a prepared "verbal statement" to the press, Mr Li said the ratings "validate the financial and operational strengths of our core telecommunications business and the PCCW group".

PCCW's share price, which hit a high of $HK28.50 in February last year compared to recent lows of around $HK2.20, has recovered slightly this week on the news the company is prepared to lay off workers and cut costs on its expensive internet strategy.

Announcing the new strategy this week, Mr Li said "in the exuberant days of the equity markets" last year, company's were "rewarded for building markets ahead of revenues".

"What the market needs today is financial prudence, growth in EBITDA and revenue in a short period of time," he said.

PCCW has promised to cut the cost of its internet strategy from almost $400 million this year to around $200 million from the beginning of 2002 until the end of 2003.

This report appears on news.com.au.

c.moreover.com
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