PLDT offers to buy back notes due in 2003, 2004

Telecommunications industry leader Philippine Long Distance Telephone Co. has initiated cash tender offers to purchase any and all of its outstanding 8.5 percent notes due in 2003 as well as 10.625 percent notes due in 2004.

This came after PLDT’s announcement that it will float 10-year fixed rate notes in order to raise $250 million to refinance a mix of bank debts and bonds maturing between 2002 and 2004.

The company’s issue is expected to serve as a litmus test for the financial market’s appetite for Asian bonds. It is also expected to improve investor confidence in the telco which during the first half of the year reported an unconsolidated total debt to EBITDA (earnings before interest, taxes, depreciation, and amortization) of 5.47 to 1, nearly breaching the limits stipulated in debt covenants with its creditors of 5.5 to 1.

The announcement of a bond float last Friday also surprised a market which expected PLDT to issue the bonds only until late this year due to weak market conditions.

According to PLDT, the price for validly tendered notes will be determined based on a spread of 350 basis points over a reference treasury security in the case of the notes due 2003, and a spread of 400 basis points for notes due 2004.

Credit Suisse First Boston Corp. and HSBC Securities (US) Inc. will serve as dealer managers for the offers.

The minimum price for each $1,000 principal amounts of notes due 2003 is $1,010 plus accrued and unpaid interest up to, but not including, the payment date. For $1,000 notes due 2004, the minimum price is $1,045 plus accrued and unpaid interest.

These minimum prices, the company said, include a payment of $10 (the early repurchase payment) for cash $1,000 principal amount of notes validly tendered before 5 p.m. New York time on Sept. 21 (the early repurchase date). Notes tendered after 5 p.m. New York time on Sept. 21 will not receive the early repurchase payment. Also, notes tendered before 5 p.m. New York time on the early repurchase date may not be withdrawn after that date.

Each offer will expire at 5 p.m. New York City time on Oct. 9 unless terminated earlier or extended. Holders of notes must tender their notes on or before this expiration date in order to receive the tender offer consideration.

PLDT said that its obligation to accept for purchase, and pay the tender offer consideration is subject to and conditioned on the satisfaction of certain financing and other conditions described in the offer to purchase dated Sept. 7.

PLDT is listed on the Philippine Stock Exchange and its American depository shares are listed on the New York Stock Exchange and the Pacific Exchange. It has one of the largest market capitalizations among Philippine listed companies and is the country’s leading telecommunications provider.