True corp brings first accelerated placement from Thailand

Investors take on 15 day settlement risk to buy telecom operator''s share placement.

Merrill Lynch completed the first accelerated block trade out of Thailand after Wednesday's close (December 1), raising Bt2.7 billion ($70 million) for True Corp, formerly known as TelecomAsia. The 398 million new share deal was marketed at Bt6.3 to Bt6.8 and priced at Bt6.8, which represents a 7.5% discount to the stock's close of Bt7.35.

The transaction faced a number of challenges, but managed to attract demand of $275 million, with participation by 54 accounts. However, the true deal size was just $38 million as the controlling shareholder - Charoen Pokphand - subscribed to 174 million shares to maintain its stake at 43.69%. Existing shareholders will be diluted by 10.8% and the freefloat will expand from 45.2% to 54.5%.

The biggest execution hurdle was the long settlement period for a stock, which trades at a high volatility level of 82%. The new shares will not begin trading until December 15.

The stock has also spiked quite significantly since early August when it hit a year-to-date low of Bt3.64. The upswing has been generated by a resolution of debt restructurings at two of its subsidiaries - 100% owned Asia Wireless (AWC) and TA Orange. Proceeds from the placement, for example, are being used to buy-back debt from AWC.

Analysts believe the group's re-organization should allow it to re-focus on its core operations and become free cash flow positive by 2005. True Corp is a fully integrated telecom operator - one of only two fixed line operators in Bangkok, with a PHS wireless service through AWC, a mobile service through a 44% stake in TA Orange, a broadband service and a stake in UBC, Thailand's only cable TV operator.

A second catalyst for stock price performance may be the removal of access fees following the recent establishment of the National Telecommunications Commission.

The company is currently trading on an EV/EBITDA ratio of6.5 times 2005 earnings versus 6.5 times for Total Access and 6 times for AIS.

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