HKT Trust, a telecom trust controlled by Hong Kong tycoon Richard Li, raised HK$7.9 billion ($1 billion) in a rights issue on Thursday.
The proceeds of the issue, which experienced strong participation from existing shareholders, will go towards paying back a loan HKT Trust took on to acquire a mobile phone operator.
There was a 99.38% take up by shareholders for 1.16 billion rights share-stapled units (SSUs), which priced at HK$6.84 per unit, a 20.65% discount to the June 12 closing price, according to a banker close to the deal.
Stapled securities comprise of units in the trust as well as shares in the company that hold the trusts' underlying assets.
The rights issue was initially announced on June 13.
Majority shareholder PCCW, owned by Li, took up 63% of the offering, or 728 million units, while other existing shareholders made up the balance, the banker said.
The joint underwriters — Citi, Deutsche Bank, Goldman Sachs, HSBC, Morgan Stanley and Standard Chartered — took up the unsold units, which were so minimal they were “almost like a rounding error,” the banker told FinanceAsia.
HKT Trust, a subsidiary of Hong Kong fixed-line company PCCW, will use the proceeds from the rights offering to help pay down debt amassed from its $2.43 billion acquisition of CSL New World Mobility, the cell phone operator it acquired from Australia’s Telstra Corp.
Late last year, HKT Trust took out an 18-month $2.5 billion short-term bridge loan to help fund the acquisition, which closed in May. HKT Trust’s debt totalled HK$24 billion as of December 2013, according to its annual report.
Analysts generally agreed the rights issue would remove the overhang related to the CSL acquisition funding, which appears to have boosted confidence leading up to the rights offering. One analyst report forecasts that the rights issue will deliver 5.7%/6.2%/6.7% yields from 2014-2016, compared to 5.7%/5.9%/6% on a standalone basis.
“Investors like the story,” the banker told FinanceAsia. “It’s the right name and in the right sector. And they can already see the synergies by integrating [CSL and HKT Trust].”
HKT Trust shares have performed well since its IPO in November 2011, which raised $1.2 billion — shares have spiked 107% since and are up 23% year-to-date. The aftermarket performance since the rights issue has been solid also, with shares up 14% since the deal was announced on June 13.
“This deal was enormously successful. The share price traded up after the rights issue. It’s unusual; usually share prices trade down,” the banker said.
HKT Trust sold 18 rights SSUs for every 100 existing SSUs, according to a term sheet. The subscription period ran from July 3 to July 15.
Hong Kong typically has fewer trusts than Singapore, which is experiencing a recent bout of activity from trusts.
This is particularly the case with Reits, as issuers seek to exploit the window of opportunity for yield-based equity plays amid the rock-bottom interest rate environment.
Frasers Hospitality Trust raised S$367.9 million ($296 million) in an IPO in late June, while Accordia Golf Trust, a golf course-backed spin-off from Japan’s Accordia Group, aims to raise up to S$782 million in an IPO later this summer.
This article has been amended to reflect that Frasers Hospitality Trust raised S$367.9 million in its IPO.