PLDT sets purchase price for maturing notes

Armed with the $350-million proceeds from its recent highly successful notes offering, telecommunications giant Philippine Long Distance Telephone Co. (PLDT) has set the purchase price for its notes amounting to around $320 million that are maturing next year and the following year.

The notes buyback is being undertaken as part of the company’s liability management exercise aimed at creating a healthier debt profile. The tender offer for PLDT’s 8.5 percent notes due 2003 and 10.625 percent notes due 2004 is still underway, with final deadline for participation set for May 15.

PLDT has around $1.3 billion in debts that are maturing between 2002 and 2004. Management hopes to settle half of this using internally generated funds, including dividends from wireless subsidiary Smart Communications, and half from new borrowings.

The company last April 25 gained such strong demand for its $350 million two-tranche issue ($100 million five-year deal and a $250 million 10-year issue), which was oversubscribed‚ that it was launched days ahead of schedule. Orders reached as much as $1.575 billion for the notes offering handled by Credit Suisse First Boston and Morgan Stanley.

The deal now stands as the largest regional high-yield transaction since Asia Pulp & Paper’s deals in 1997, according to the lead managers.

With the transaction complete, the firm is now in a position to deleverage itself. Of the $650 million that PLDT hopes to raise from external sources, officials say that 90 percent has already been sourced and that the remaining $70 million can easily be sourced from additional loans.

PLDT was earlier able to secure a $149 million loan from Germany’s KfW as well as an $80 million loan from the Japan Bank for International Cooperation (JBIC).

Although PLDT’s issue was expensive on a historical note, the success was vital for PLDT to stave off $320 million in redemptions and create a healthier debt profile. The company’s notes offering was launched hand in hand with a tender offer to buyback its $125 million 2003 and $204 million 2004 notes.

The notes buyback is subject to the terms and conditions as provided in its offer to purchase dated last April 11 and will expire at 5 p.m., New York time, on May 15 unless extended by the firm.

Holders of notes who tendered prior to 5 p.m., New York time, last May 2 (the early repurchase payment date) will receive the tender offer consideration plus the early repurchase payment of $15 per $1,000 principal amount of notes.

The tender offer consideration for the 8.5 percent notes due 2003 was determined using the yield of the 3.875 percent US treasury note due June 30, 2003 (the applicable reference security), plus a fixed spread of 350 basis points. The yield on the applicable reference security, as calculated by dealer managers Credit Suisse First Boston Corp. and Morgan Stanley & Co. at 2 p.m., New York City time, on May 10, 2002, was 2.410 percent.

Accordingly, the tender offer yield and the tender offer consideration per $1,000 principal amount of notes are 5.910 percent and $1,012.55, respectively. The total consideration is $1,027.55 (includes the early repurchase payment).