PCCW: 2000 Deal of the Year...lemon of the decade

In 2000, we gave our Deal of the Year award to a $12 billion syndicated loan that was issued to then small start-up tech company Pacific Century Cyberworks (PCCW). The company is now the largest integrated communications company in Hong Kong, but at the time of the deal, PCCW had only been running for 10 months.

PCCW was always destined to grow. Run by Richard Li, second son to property tycoon Li Ka-shing, it had the financial and operational backing locked in from the outset.

At the time, the $12 billion loan was a record transaction in the Asia syndicated loan markets -- more than double the size of the previous record holder in fact -- and in our awards write-up we said it "opened the door for leveraged financing across the broader spectrum of the region's capital markets".

The leads decided to structure a deal as a leveraged financing secured against the assets of the target company and a non-recourse structure through a special purpose vehicle owning the HKT shares was used. The debt-to-Ebitda ratio was nine times, versus typically no more than 5.5 times for European deals at the time.