Hong Kong's PCCW seeks to sell 45 per cent stake in HKT Group for $2.5 billion

14 July 2008

PCCW Ltd., Hong Kong's dominant fixed-line operator, is seeking around $2.5 billion for a 45 per cent stake in its HKT Group Holdings Ltd. unit and has already received interest from several US private-equity firms, people familiar with the deal said today.

Some names mentioned include Australia's Macquarie Group, and American firms TPG Capital, Providence Equity Partners Inc., KKR & Co. and Blackstone Group LP. TPG and Providence are being considered frontrunners at present, sources said.

UBS AG, the sole financial adviser of the deal, said as of the 6 p.m. local time (6 a.m. EDT) deadline Monday, it had received a number of proposals and is now in the process of evaluating them. UBS declined to name the bidders.

Additionally, PCCW is in talks with banks for a $3 billion facility, some of which will be used for financing its HK$16.6 billion ($2.13 billion) debt under its restructuring plan. Bankers also said the remaining $800 million would be injected into the new entity, HKT Group Holdings Ltd, which is to hold the group's media and telecoms businesses.

However, with the current credit squeeze showing no signs of softening out, it may be forced to pay its highest rates for the loan, as much as 175 to 250 basis points above the benchmark lending rate. That's more than three times the spread PCCW is paying for loans taken two years ago. A basis point is 0.01 percentage point.

This May PCCW said it would place its telecommunications services, media and information technology businesses under HKT Group. The group would have $899 million of EBITDA, or earnings before interest, tax, depreciation and amortization, up 12 per cent from 2006, according to a stake sale document sent to investors on 27 June.