REPEAT&CORRECT: PCCW Has Paid Off US$500M Of US$4.7B Loan
January 25, 2002
Dow Jones Newswires
HONG KONG -- Pacific Century CyberWorks Ltd. (PCW) has paid off US$500 million of the US$4.7 billion syndicated term loan held by its fixed-line telecommunications unit from internal resources, the group's chief financial officer told Dow Jones Newswires.
This is slightly less than the US$750 million expected by some analysts. Standard & Poor's Corp., for one, said in a press release rating a November bond issue that the company "plans to prepay another US$750 million of the loans with its own cash reserves before the end of 2001."
PCCW stressed, however, that while it referred to a planned prepayment of US$750 million in the November bond prospectus it never said it would use cash reserves for this payment.
The Hong Kong-based telecom and Internet services provider has also refinanced the remainder of the US$1.5 billion three-year tranche of the loan held by PCCW-HKT Telephone Ltd., David Prince said in a written response to questions from Dow Jones.
Prince wouldn't comment further on exactly how much of the three-tranche syndicated loan has been refinanced, but noted that more information will be available in the earnings report in late March. However, analysts generally believe that parts of the US$2.3 billion five-year tranche have been replaced by longer-maturity fixed-coupon debt.
"Overall we are lowering average cost of our long-term debt by taking advantage of the current market conditions, i.e. low interest costs and liquidity," Prince said, without elaborating.
Nor would he confirm analyst estimates that PCCW-HKT's total debt to EBITDA (earnings before interest, tax, depreciation and amortization) ratio has fallen below a crucial threshold of 3.5 times, saying only that "after all the recent transactions, our debt position has decreased."
Hinting that the company's efforts to decrease its total debt are continuing, he added: "We have been rated a solid investment grade in our core business (PCCW-HKT) and are focused on strengthening this."
Debt/EBITDA Ratio Key To Access HKT's Pft
Once PCCW-HKT's debt to EBITDA ratio falls below that threshold, the company will be allowed to transfer 75% of PCCW-HKT's profits to the parent company in the form of dividends. As long as it remains above, the covenants attached to the syndicated loan restrict the dividend payments to 35%.
Analysts estimate the total debt held by PCCW-HKT at about US$4 billion by the end of 2001, although this assumed a loan paydown of US$750 million.
Apart from the remainder of the term loan, the total debt also includes around US$250 million of euroyen bonds issued in October and US$1 billion of yankee bonds issued in November, which were both guaranteed by the fixed-line unit, analysts say.
Based on the company's initial guidance on what the bond proceeds would be used for, analysts project that proceeds from the yen bond and last week's US$450 million convertible bond will go toward the refinancing of the US$2.3 billion tranche of the term loan due February 2006.
The term loan also includes a US$900 million tranche due February 2008.
PCCW-HKT is rated BBB by S&P and Baa1 by Moody's Investors Service. Both ratings are investment grade.
-By Anette Jonsson, Dow Jones Newswires; 852-2802-7002; anette.jonsson@dowjones.com
(In an item that ran at 0140 GMT (8:40 p.m. EST Thursday), the amount of analysts expecting a larger paydown was misstated. Also clarifying that analyst expectations do not stem from information from the company, and that PCCW noted it never said the prepayment referred to in the prospectus would be made through the use of internal cash.)
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