Richard Li, the son of Li Ka-shing, Hong Kong's richest tycoon, is reported to be turning to his father to help bail out his Pacific Century CyberWorks, the internet and telecommunications company which over-reached itself by taking over Cable & Wireless HKT in August.
CyberWorks had still not published the terms of its deal, but bankers associated with the re-funding say the company plans to raise up to $US1.8 billion ($4.3 billion) from a convertible bond sale and a rights issue. Li Ka-shing is believed to be among the buyers lined-up for the bond issue.
Cable & Wireless, which sold its controlling stake in its Hong Kong subsidiary, has declined to say whether it will take up its rights.
Previously it has given every indication of wanting to sell as much as possible of the 20.2 per cent holding of 4.5 billion shares that it acquired as part of the deal.
A month ago, it placed 4.9 per cent of CyberWorks' equity with institutions, leaving it with 15.3 per cent.
Cable and Wireless acquired the CyberWorks shares at a price of $HK15.80 ($4.80) a share. They were trading at $6.50 before being suspended yesterday, giving Cable and Wireless a paper loss of about 40 per cent of the £10.4 billion ($NZ36 billion) it claimed to be raised by selling its stake.
The new fund raising will, if successful, inject $1.8 billion into CyberWorks.
Some $500 million will come from Richard Li himself in the form of convertible bonds, and $600 million will come from other investors.
A further $200 million may be issued to the public if demand exists.
On top of this is a $500 million rights issue offering 30 new shares for 1000 shares.
CyberWorks shares have been in free-fall because of fears of further sales by Cable & Wireless and concerns over the debt burden at a time of falling revenues and rising investment needs.
To complete the $28.5 billion Cable & Wireless Hong Kong Telephone takeover, CyberWorks secured a syndicated loan of $12 billion that is due for repayment in February.
CyberWorks has managed to raise about $3 billion from the cash reserves of Cable & Wireless Hong Kong and from its own treasury, bringing that debt down to $9 billion.
Richard Li said recently that a deal with Australia's Telstra for the sale of mobile telephone and broadband assets had cut the debt to $5.45 billion.
David Webb, a Hong Kong-based analyst, believes that the true debt level remains around $7 billion.
He says CyberWorks is simply funnelling some of the debt into an associated company and claiming that a $750 million convertible bond issued to Telstra is not classed as debt.
CyberWorks has positioned itself as a magnet for alliances with overseas companies seeking internet business in Asia. But recently, high-profile partners have pulled out of deals with the company.
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Hong Kong tycoon needs dad's dollars
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