Telecom, which aims to split itself in two to secure government funding and shed regulatory burdens, has sweetened its offer to bond holders owed NZ$541 million in a bid to get the deal over the line.
The company raised the fee on offer to its Telebond holders to 0.5% from a previously offered 0.25% after discussions with investors, it said in a statement. That will cost the company an extra NZ$1.35 million as it pays out a total NZ$2.7 million of fees to investors.
In addition, Telecom will top up its annual interest payment to bondholders by 0.5 percentage points if its credit rating is cut below the ‘A’ band.
“In return for their support, we have agreed to increase the consent fee and provide an increase in the interest rate paid on the existing stock in the event that both Standard & Poor’s and Moody’s decrease the credit rating of Telecom below the ‘A’ band,” chief financial officer Nick Olson said. “The potential coupon increase component of the proposal adds an additional level of comfort for stockholders.”
Telecom put forward a demerger proposal in an attempt to access NZ$1.35 billion of government funding to build a nationwide broadband network and shed regulatory oversight, which it claimed was overly burdensome. If investors agree to the deal, Telecom’s Chorus network unit become a standalone listed entity, at a benefit of some NZ$500 million to shareholders based on the Crown subsidy, according to independent adviser Grant Samuel’s report.
Last week, investor in two tranches of foreign currency denominated Telecom bonds agreed to the deal.
Telecom’s shares were unchanged at NZ$2.57 in trading today, and have climbed about 18% this year.
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The inducement worked:
30 September 2011
Telebonds stockholders approve demerger extraordinary resolution
Telecom has today announced the results of the demerger consent vote relating to Telebonds and other NZ$ denominated stock issued by TCNZ Finance Limited (Stock).
A Stockholder meeting took place today to vote on an extraordinary resolution authorising and directing the trustee to approve the terms of the demerger.
The results are set out below:
For Against Abstain Result Pass/Fail
435,374,978 3,000 - 99.999% in favour Pass
Given the extraordinary resolution has been passed, Telecom will now formally request the trustee to approve the terms of the demerger. The trustee has confirmed that it will act in accordance with the passed resolution.
Telecom currently has approximately NZ$541 million of Stock outstanding. It is proposed that the Stock remains with Telecom following demerger.
Under the terms of the trust deed relating to the Stock, the consent of the trustee for the Stockholders (The New Zealand Guardian Trust Company Limited) is required to approve the terms of the High Court approved scheme of arrangement providing for the demerger of Telecom. The trustee informed Telecom that it considered that was a matter for the Stockholders to vote on; accordingly the trustee will approve the terms of the demerger only if authorised to do so by an extraordinary resolution of Stockholders.
On 13 September 2011, Stockholders were sent a booklet and proxy form, including a request that they vote in favour of the extraordinary resolution.
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