PCCW may raise up to HK$11b from city's first business trust
PCCW is set to spin off its telecommunications assets on November 29, heralding the first listing of a business trust in Hong Kong, a person familiar with the deal said yesterday.
The media and telecommunications giant estimated it will generate proceeds of about HK$10.2 billion should the shares of spin-off HKT Trust sell for HK$4.95 each, the mid-point of the previously announced initial public offering price range of HK$4.53 to HK$5.38 per share, according to the person.
He confirmed a Bloomberg report on the offer's schedule that was based on a filing by PCCW with the Ministry of Finance in Japan.
PCCW started its global roadshow yesterday with an eye to offer about 2.05 billion units of HKT Trust to investors. The company will host an investor luncheon today at an undisclosed venue.
Alex Arena, the group managing director at PCCW, said in August that the planned business trust listing had received 'a lot of interest' in Hong Kong and 'from investors all around the world'.
A business trust, which pays dividends from its operating cash flow, allows companies to raise cash while without releasing control of the separately listed units. The structure has not been seen in Hong Kong, but is used in Singapore.
In a filing with the Hong Kong stock exchange yesterday, PCCW said its shareholding in HKT Trust will be reduced to 63 per cent after the IPO, assuming the prescribed over-allotment option is not exercised, or to 59.9 per cent if fully exercised.
Macquarie Securities analyst Lisa Soh said the HKT Trust stock valuation 'looked expensive' based on its estimated price-earnings ratio of 21.3 to 25.3 times. Its yield, or dividend, is projected to be from 7.4 per cent to 8.8 per cent.
'Compare that to SmarTone on a 7 per cent yield on 14 times earnings,' Soh said.
Moody's Investors Service yesterday said the successful listing of HKT Trust is expected to help pare down the US$2.5 billion in debt securities of PCCW's Hong Kong Telecommunications (HKT) business.
The credit rating agency in March placed HKT's medium-grade Baa2 rating under review for possible downgrade pending completion of the listing.
Laura Acres, a Moody's vice-president, said the listing could reduce that debt to US$1.5 billion if bonds due on November 15 are repaid.
Once PCCW did that, 'it is likely that Moody's would conclude the rating review and confirm the [HKT] ratings at Baa2 with a stable outlook', Acres said.
