Hong Kong's PCCW expects to raise up to HK$11 billion (€1 billion) from a global IPO of almost a third (32%) of telecoms arm Hong Kong Telecommunications (HKT).
The company expects the indicative price range to be between HK$4.53 and HK$5.38, a filing reveals, which places the total sale price at between HK$9.30 billion and HK$11.04 billion, and leaves the firm with a total market capitalization of between HK$29.06 billion and HK$34.52 billion.
If the IPO is fully subscribed, PCCW's holding in HKT would be reduced to 63%, unless it takes the option to make an over-allotment if demand is strong, in which case it would fall to 59.9%. The firm plans to pump the bulk of the proceeds into paying down debt.
Credit ratings agency Moody's notes the IPO and the plans in place to repay bonds expiring this month, would allow PCCW cut its net debt by around $1.5 billion (€1.1 billion).
Should this happen, Moody's would be likely to confirm PCCW's Baa2 credit rating with a stable outlook, vice president Lauren Acres says. “However, should the plans for the business trust structure be aborted or timing be delayed beyond the anticipated closing date of Q4 2011, then Moody's would close the review and most likely downgrade the Baa2 ratings on HKT to Baa3,” she added.
Acres adds that with PCCW set to be the principal shareholder in a listed HKT, the former's actions will continue play a role in determining the rating of the latter.
PCCW first announced plans for the spinoff in March. The Hong Kong stock exchange initially rejected the model, but PCCW successfully appealed the decision.