IP Backbone Company (IPBC) - the internet protocol joint venture between PCCW and Telstra - has agreed to pay more to its bankers for its fully underwritten $1.5 billion loan signed in December. The move comes just a couple of days after another PCCW subsidiary - HKTC - agreed to pay more for its fully underwritten loan, and as borrowing costs for global telecom companies continue to rise due to bank overexposure to telecom debt.
The change in margin payments in expected to cost IPBC $6.1 million a year. The changes to the margins of the three tranche loans are outlined below:
| Tranche | Amount | Tenor | Increase in margin |
| A | $300m | 3 | From 50bp to 75bp |
| B | $825m | 5 | From 65bp to 105bp |
| C | $375m | 7 | From 80bp to 135bp |
The loan is fully underwritten by Barclays Capital and Chase Manhattan and the move has been widely expected in the market, after the increase in margins of the larger $4.7 billion refinancing loan for HKTC.
So far, eight banks, including Barclays and Chase, have committed to the transaction, the other six being Citibank, HSBC, Rabobank, CSFB, Sanwa and UBS Warburg. It is not known how much these banks have committed or what the final breakdown of each bank's commitment will be. But a statement issued by the arrangers says full closure of the loan is expected by mid-January. It is expected that the arrangers will then go into general syndication of the facility.
Interestingly, the increased margins for this loan are less than the increases for the HKTC loan by 10bp in each tranche. This suggests that banks are happier with the credit of an international voice, data and internet carrier than they are of a Hong Kong fixed line near-monopoly. It also indicates that with only $1.5 billion to raise and eight banks already committed, the increase needed to be less. Even so, the increase shows how keen PCCW is to raise finance prior to the maturity in February of its original leveraged loan used to buy Hong Kong Telecom.
