PRESS RELEASE:Moody's: Profit Century Y30B Notes Get Baa1
Updated: Tuesday, October 30, 2001 11:34 AM ET
Following is a press release from Moody's Investors Service:
Hong Kong, October 30, 2001 -- Moody's Investors Service today assigned a Baa1 senior unsecured rating to the JPY30 billion fixed rate notes (the Notes), due 2031, of Profit Century Finance Limited, guaranteed by PCCW-HKT Telephone Limited (HKT, news, msgs). The rating outlook is stable.
Moody's says the rating reflects HKT's: leading market position with a strong brand and high customer loyalty; ubiquitous and modern network; experienced management; and commitment by Pacific Century Cyberworks Limited (PCCW, news, msgs), HKT's parent, to maintain the company's adequate financial profile.
Furthermore, the rating also reflects PCCW management's stated strategy to consolidate the group around the strengths of HKT, with no plans to materially expand the scope or scale of the business. PCCW interim results indicate a solid performance from HKT with strong cash flows being generated.
The rating also considers risks associated with PCCW, given its short credit history and recent large acquisition. HKT may be required to support the PCCW Group's capital needs over and above that company's existing reserves. This could be a concern as HKT's high level of gearing limits financial flexibility at the current rating. HKT could also face strong competition as it expands into certain new and less predictable revenue streams, such as broadband and local data services.
Moody's notes that HKT has the potential to leverage off product offerings developed by PCCW while combining certain overlapping functions. PCCW has a number of start up investments that are currently cash negative and over US$1.8 billion in convertible notes liabilities maturing in 2005 and 2007.
PCCW has established joint ventures with Telstra Corporation Limited, namely Reach Ltd. and Regional Wireless Company, both of which are intended to be self- funding, but may require additional capital to fund growth. Moody's adds that PCCW has a degree of flexibility to fund its activities, provide capital, and refinance or repay its convertible notes given its cash reserves and asset base.
The Notes will be guaranteed by HKT and rank pari passu with that company's existing senior unsecured debt. PCCW plans to use proceeds from the Notes for working capital and other purposes. The rating outlook for the Notes is stable reflecting HKT's strong and predictable cash flows.
PCCW-HKT Telephone Limited, based in Hong Kong, is the principal provider of fixed line services in that city. DOW JONES NEWS 10-30-01 11:03 AM
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