PCCW abandons massive bond deal

PCCW head, 34-year-old tycoon Richard Li

HONG KONG, China -- Pacific Century CyberWorks, Hong Kong's dominant telecoms carrier, has scrapped its US$2.5 billion bond offering, citing volatile market conditions.

"Despite strong investor interest in a potential debut bond offering, the company has decided not to proceed with a bond offering at this time," PCCW, headed by 34-year-old tycoon Richard Li, said in a statement late Friday.

PCCW had wrapped up an investor road show in New York on Friday, with investors expecting pricing on a deal that had already been scaled back from its original size, according to sources.

"Specifically, present volatile bond market conditions arising from Argentina and other uncertainties in the emerging markets have resulted in potential pricing that the company finds unattractive at this time in comparison with its existing financing," PCCW said.

At US$2.5 billion, the deal launched two weeks ago by PCCW's core fixed-line telecoms unit would have been Asia's biggest corporate bond offering outside of Japan.

Slack demand had forced the telecoms and Internet firm to scale back its ambitious offering to US$1.5 billion earlier on Friday, and boost the note's yield to 325 basis points above U.S. Treasuries, sources had said.

'Financial prudence'

Many company watchers in recent days had questioned the wisdom of proceeding with the offering, with market response indicating the deal would be increasingly expensive and less attracive for PCCW.

PCCW had planned to use proceeds from the investment grade offering partially to refinance its US$4.7 billion bank debt, which comes due in 2004, 2006 and 2008.

PCCW's debt burden results from its US$28.5 billion stock and cash purchase last year of Cable & Wireless HKT, Hong Kong's dominant telco.

The company noted in its statement that it had no immediate need to refinance the debt.

Asked if PCCW will seek other refinancing options, spokeswoman Joan Wagner said: "We will continue to evaluate our refinancing options, but we will only consider options that we regard as favourable."

She added: "We are exercising financial prudence."

PCCW stock closed at HK$2.125 (US$0.27) on Friday, down 1.16 percent on the day. It has lost 58 percent so far this year, making it the worst performing blue chip in Hong Kong.

Reuters contributed to this report.