Chorus, the telecommunications network company carved out of Telecom, won't need to tap too much of a bridging loan after securing a $1.35 billion syndicated bank facility.
Chorus, which officially demerged from Telecom today, added $350 million to the facility due to strong demand from local and foreign financial institutions, chief financial officer Andrew Carroll said in a statement. No interest rate was stated, though Telecom's effective weighted interest rate for long-term debt at a fixed rate was 7.7 per cent, according to its 2011 annual report.
"This means we can get on with building our fibre network with even greater funding certainty," Carroll said.
The facility is made up of two equal tranches of $675 million over three and five years, and means it will probably make "very limited drawings" on a $2 billion bridging facility with Citibank New Zealand, ANZ National Bank and Westpac Banking.
The 364-day unsecured bridge loan was put in place to pay for assets from Telecom and had an assumed effective interest rate of 5.44 per cent, according to the demerger documents. The syndicated bank facility was envisaged as repaying draw-downs on the bridging loan.
Citibank acted as a debt adviser to Chorus, and was joint lead arranger and bookrunner with ANZ National and Westpac.
Chorus also expects to issue 234.8 million pounds of Euro Medium Term Notes which mature in 2020. Telecom's British pound-denominated bonds paid annual interest rates of 5.8 per cent for the 2020 tranche and 5.6 per cent for the 2018 tranche.
The network company expects to be saddled with $1.7 billion of net debt after today's split, while Telecom will have between $750 million and $950 million.
Today's formal demerger is the culmination of an 18-month process for Telecom to shed its regulatory burden of operating a network monopoly in exchange for a $929 million government subsidy for Chorus to build the backbone for a nationwide broadband network.
Shares in Chorus fell 1.8 per cent to $3.25 in trading today, but are still up 11 per cent from the listing price last week. Telecom stock gained 1.5 per cent to $2.02 and is up 4.1 per cent from the adjusted price from the separation.