PLDT completes bond tender

The Philippines telco achieves an overall acceptance ratio of 54.68% for the cash tender of its 2003 and 2004 dollar bonds.

The second part of PLDT's crucial liability management exercise was completed at New York's close on May 15, with a total of $180 million in bonds tendered. Proceeds from the recent $350 million twin tranche global bond offering were used to fund the company's buy-back of its shorter dated bonds, with the $170 million balance being used to pay down debt as it falls due.

Under the lead of dealer managers Credit Suisse First Boston and Morgan Stanley, a total face value of $62.97 million was tendered for the $125 million 8.5% June 2003 bond, equating to an acceptance ratio of 50.38%. Where the $204 million 10.635% 2004 bond was concerned, investors tendered a face value of $116.94 million, an acceptance ratio of 57.33%.

The tender prices had been announced at the beginning of the offering period in late April as a fixed price to Treasuries in order to minimise Treasury volatility during the intervening period. For the 2003, this was set at 350bp over Treasuries on a minimum cash price of 101.5% and at 385bp over Treasuries for the 2004, which had a minimum cash price of 105%. Final pricing was fixed at 102.765% for the 2003 and 106.668% for the 2004.

At the time the tender was announced, the 2003 had been trading on a cash bid price of 98.625% to yield 9.69% or 626bp over Treasuries and the 2004 at 100.75% to yield 10.21% or 677bp over Treasuries. Relative to this date, investors have received a four point pick up for tendering the 2003 bonds and just under a six point pick up for tendering the 2004 bonds.

The completion of the tender should give a lift to PLDT spreads which have already tightened in since the company was able to raise five and 10-year dollar debt at the end of last month. This comprised a $100 million 2007 bond, which priced at 99.99% to yield 10.625% or 622bp over Treasuries and a $250 million 2012 bond, which priced at 99.988% to yield 11.375% or 630bp over Treasuries.

Since then the 2007 has tightened 76bp in Treasury terms and the 2012 by 50bp. At yesterday's close in Asia, the former was bid at 102.25% to yield 10.04% or 546bp over Treasuries and the latter at 101.94% to yield 11.05% or 580bp over Treasuries.

The company also announced its first quarter results yesterday, with group EBITDA rising 15.5% year-on-year to Ps10.5 billion. The company said that the improvement had been driven by cost cutting measures and the growth at its cellular subsidiary Smart.

One of the company's key challenges over the coming three years is to reduce a debt load, which still equates to a debt to EBITDA ratio of four times and EBITDA to interest coverage ratio of 2.3 times.

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