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Technology Stocks : PCW - Pacific Century CyberWorks Limited -- Ignore unavailable to you. Want to Upgrade?

To: ms.smartest.person who wrote (829)	3/30/2001 12:47:22 AM
From: ms.smartest.person	Read Replies (1) \| Respond to of 2248

AWSJ:HK Exchange Waives Rules For Pacific Century CyberWorks 11:55, 2001-03-30 By Gren Manuel and Matt Pottinger Staff Reporters HONG KONG -- The Hong Kong Stock Exchange has quietly agreed to stretch its rules to accommodate Pacific Century-CyberWorks Ltd. even though the Internet and telecommunications conglomerate's liabilities are greater than its assets -- a move that could stir complaints the company is getting special treatment from city authorities. PCCW reported a negative net worth at the end of 2000 of US$1.8 billion on Wednesday when it announced weaker-than-expected year-end results, unleashing a torrent of selling that briefly pushed its share price to HK$2.975 (38 U.S. cents), its first dip below HK$3 since June 1999. The share closed on Thursday at HK$3.25, down 22.5 cents, or 6.5%. Company executives and analysts say the negative net worth, which was the result of a conservative accounting treatment of its US$29 billion acquisition of Cable & Wireless HKT Ltd., was a bookkeeping issue that wouldn't hurt the company's cash flow or its ability to pay off debt. The Hong Kong stock exchange's rules require companies to seek shareholder approval for any transaction involving 50% of its net assets. Since PCCW reported negative net assets for the latest year, the rules suggest it would have to consult its shareholders on all notifiable transactions, such as mergers and acquisitions. But a company statement Thursday night disclosed for the first time that following the August takeover of HKT, the exchange granted a waiver to the company in which shareholders would only need to be notified of transactions if they exceeded HK$2 billion. The date of the waiver wasn't disclosed, but it was agreed that the arrangement would be reviewed when the company announced its annual results this week. PCCW said in the statement it was seeking that review and ""will apply for such further waivers as may be appropriate."" The exchange's waiver may reignite claims that PCCW Chairman Richard Li is getting an easy ride from the city's authorities. Democratic Party legislator Sin Chung-kai, a critic of previous deals involving Mr. Li, when told of PCCW's arrangement, said it constituted special treatment for the company and called on the government to investigate. City authorities have been accused of favoring Mr. Li on previous occasions, including awarding his company -- without calling a tender -- a contract to build a US$2 billion technology park named Cyberport on a large, valuable piece of coastal land. The exchange declined to discuss the PCCW waiver, saying such disclosures were up to companies to make. But it said in general, the exchange had to ""balance regulatory requirements and investor protection without restricting the issuer's business activities."" Exchange rules state that the asset test may be waived if a company can show its balance sheet ""does not reflect the real value of the business."" Meanwhile, completion of some deals with Telstra Corp. of Australia in February will have improved its asset position since the end of 2000, figures from PCCW indicate. These deals will cut the company's net deficit by about half to US$925 million, the figures show. Although the net liability is a first for a major company in Hong Kong, PCCW's deputy chairman, Francis Yuen, said it was common in other financial centers such as London. Most analysts agree that the company won't have a problem servicing the debt it took on during the August takeover. The latest figures prompted analysts who had been bullish on PCCW to downgrade their recommendations. Some had kept their ""buy"" opinion even as the stock fell from HK$17 at the time of the August takeover. In its year-end report, PCCW announced a US$667 million charge on bad investments. Statements about the prospects of its newly acquired telecom business did little to impress analysts. ""It (the deficit) is something we'll look at very carefully, but these are book values. Their cash flow should allow them to cover at least the interest on their debt. They're financially strapped but not financially distressed,"" said an analyst in Hong Kong. Copyright c 1999-2000 Dow Jones Inc. All rights reserved. quamnet.com