Bloomberg News

PCCW Raises $1.2 Billion in Hong Kong Business Trust IPO

November 23, 2011

(Updates with closing share price in sixth paragraph.)

Nov. 23 (Bloomberg) -- PCCW Ltd., the biggest phone carrier in Hong Kong, raised HK$9.3 billion ($1.2 billion) in an initial public offering of its telecommunication business trust after selling units at the bottom end of a marketed range.

The company sold 2.05 billion units in HKT Trust at HK$4.53 apiece, according to a stock exchange statement today. The price implies a dividend yield of about 9 percent, people with knowledge of the matter said earlier.

PCCW’s billionaire Chairman Richard Li struggled to draw investors to Hong Kong’s first business trust even after offering a yield that beats most real-estate trusts listed in the city. Shares of companies that went public in Hong Kong through IPOs have dropped an average 20 percent from their offer price, data compiled by Bloomberg show.

“Retail investors were not that interested in this deal because they don’t have a long investment horizon,” Alan Kam, a Hong Kong-based analyst at Daiwa Securities Capital Markets Co., said in an interview today. “If the stock market is volatile, long-term investors will look for defensive investments like the PCCW trust.”

Kam rates shares of PCCW “outperform.”

PCCW fell 3.3 percent to close at HK$2.91 in Hong Kong trading, the largest decline since Oct. 4. The benchmark Hang Seng Index dropped 2.1 percent.

HKT Trust units were originally offered at HK$4.53 to HK$5.38 each, according to an IPO prospectus.

Bigger Dividends

“Despite the very challenging macro-economic environment and financial markets during the roadshow, HKT has attracted a broad list of globally renowned institutional investors who appreciate the high quality, defensive nature of HKT,” Alex Arena, PCCW’s managing director, said in an e-mailed message distributed by public relations firm Brunswick Group Ltd. today.

Li subscribed for about 12.6 percent of the units on offer, according to a Nov. 21 filing to the exchange. Underwriters considered pricing below the bottom of the range because of insufficient demand just hours before the order book was closed, people familiar with the matter said yesterday.

Listing as a business trust will allow HKT Trust to pay out a high proportion of income from slow-growth services, including fixed-line phone connections and broadband Internet. Companies typically pay dividends out of profit, while a business trust allows for distributions from cash flow.

HKT Trust plans to start trading Nov. 29, according to the prospectus. The offering will help PCCW repay debt and fund investments, the company said in a Sept. 25 statement.

China International Capital Corp., Deutsche Bank AG, Goldman Sachs Group Inc. and five other banks managed the offering.

--With assistance from Edmond Lococo in Beijing. Editors: Philip Lagerkranser, Michael Tighe

To contact the reporter on this story: Fox Hu in Hong Kong at fhu7@bloomberg.net

To contact the editor responsible for this story: Philip Lagerkranser at lagerkranser@bloomberg.net


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