CyberWorks likely to end borrowing
Ben Kwok and Louis Beckerling
Pacific Century CyberWorks will pay more than US$300 million in interest over the next three years and is unlikely to borrow additional funds, according to bankers close to its loan syndicate.
The Internet company, whose US$4.7 billion refinancing was fully written by five banks on Wednesday, pledged its wholly owned fixed-line business HKT to secure the loan facility.
According to bankers, CyberWorks will be restricted to borrowing no more than five times its earnings before interest, tax, depreciation and amortisation (ebitda) in its fixed-line business in the next few years.
Based on CyberWorks' projection of generating about US$1 billion ebitda next year for its fixed-line business, the company will have to restrict its total debt to below US$5 billion.
'We will have enough resources to fund our projects at the moment,' said CyberWorks deputy chairman Francis Yuen Tin-fan in response to questions about whether the company will raise money for its Cyberport project and possibly One-CN, a global cable network in concept.
Arrangers Barclays Capital, BOCI Capital, Chase Manhattan Asia, FUJI (Mizuho Financial Group) and HSBC Investment Bank Asia will take up an equal share in the US$4.7 billion in three tranches.
CyberWorks will pay 50 basis points above the London Inter Bank Offered Rate (Libor) for a three-year loan, 65 basis points above for a five-year loan and 80 basis points above for a seven-year loan, giving an average of 66 basis points over Libor.
Mr Yuen said the all-in cost, taking into account an upfront management fee, would be about 85 basis points. 'I think even a single A ratings company would not easily secure these terms,' said chairman Richard Li Tzar-kai in an interview with RTHK.'It even exceeds my own expectation.'
Mr Li said the company would bear an annual interest expense of about US$300 million and a two-times interest coverage.
SG Securities analyst Jonathan Iu estimated the company would have to pay US$378 million in interest, assuming a borrowing rate of around 8 per cent.
'After securing refinancing, management can focus its effort to manage the share placement by Cable & Wireless, which has been a long-time overhang for CyberWorks,' said Mr Iu.
Success in refinancing did not stimulate interest in CyberWorks trading rights yesterday, the last day they could be traded.
These rights, which carried an exercise price of HK$6.50, ended the day down 38.8 per cent at 3.7 HK cents. CyberWorks yesterday was unchanged at HK$5.55.
CyberWorks is expected to sign for the US$4.7 billion refinancing in the middle of January.
Paul Tay, head of syndicated finance for HSBC Investment Bank Asia - one of the five co-ordinating arrangers for the refinancing facility - said bankers attending the presentation appeared to be very enthusiastic about taking up the loan.
Mr Tay said the loan was unsecured and no arrangement was made to set up an escrow account into which HKT's fixed-line revenues would be deposited and from which lenders would have first call for repayment.