With one day to go before the expiration of an early repurchase option, the company decided to formally withdraw the SEC filing for its $329 million cash tender on Thursday. Observers say that PLDT believed this represented the most flexible of two options open to it.
Having already cancelled the $250 million 10-year 144a bond that would have funded the buy-back, the company could have gone on indefinitely postponing the tender, launched in New York on September 7. "Under SEC rules, it is possible to postpone a tender offering if there is a reasonable expectation of being able to re-launch it," explains one observer.
"But," he adds, "the company thought this would have created a continuous level of uncertainty about it intentions and so it decided the most sensible option would be to withdraw the tender, with a view to re-filing it if and when the markets settle down. In this case, it would only take about 24 to 48 hours to clear the SEC."
The PLDT tender and bond offering has been the worst affected of all the capital markets spanning the terrorist attacks in Washington and New York last Tuesday. Unlike Korea Tobacco & Ginseng, which had been pre-marketing a combined ADR and convertible bond offering, PLDT had already begun roadshows in Singapore on the day of the attack and had been scheduled to meet investors in Hong Kong the day after.
A decision to abandon presentations was taken during a breakfast meeting between the company and lead arrangers Credit Suisse First Boston and HSBC on the Wednesday. Towards the end of the week, there then followed a rapid widening between the bid and offer prices for Asian credits as secondary flows ground to halt and traders marked out the bid in a defensive move reflecting their inability to pinpoint Treasury prices.
On the two bond issues that were being put up for tender, for example, there is currently a 130bp differential between the bid and offer. At the close of Asian trading yesterday (Thursday), the $125 million 8.5% June 2003 closed at a cash bid of $98 and bid/offer spread of 694bp/569bp over Treasuries. The day before roadshows began, the bond had been bid at 580bp, a yield of 9.4%.
The $204 million 10.625% June 2004 bond closed yesterday at a cash bid of par and bid/offer spread of 781bp/695bp, against a pre-roadshow spread of 636bp. The company's benchmark $175 million 10.5% April 2009 bond, meanwhile, is currently being quoted at a bid/offer spread of 800bp/756bp over Treasuries.
The tender offering had been designed as a means to term out the company's $3.48 billion debt, which peaks in 2003 when $629 million comes due. Bankers say that although roughly $300 million comes due this year, the BB+/Ba2-rated credit has a number of short and medium term facilities that will enable it to meet its re-payment schedule.
Terms for the cash tender had been fixed at a roughly three point pick-up over the company's 2003 bonds and a four-and-a-half point pick up over its 2004 bonds. In spread terms, the company was offering to pay 350bp for its 2003 issue and 400bp for its 2004 issue. Pricing and launch of a new 10-year bullet transaction for the tender had been scheduled to take place on September 25.
