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Jenny Ruth
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Telecom sweetens offer to retail bondholders

Thursday 22nd of September 2011

Holders of Telecom's listed bonds, whose maturities range from March 2013 to March 2016, are now being offered protection if "new" Telecom's credit rating falls below "A-" after its Chorus network business is split off into a separate company.

If "new" Telecom's rating falls to "BBB+" on Standard & Poor's ratings scale or "Baa1" on Moody's scale, bondholders will be entitled to a 50 basis point increase in their annual interest rate. If the company's rating falls another notch to "BBB" or "Baa2," bondholders' annual interest rate will increase by a further 50 basis points.

Telecom has also doubled the one-off "consent fee" for bondholders who vote in favour of the Chorus spinoff to 0.5%.

As www.depositrates.co.nz said last week, the major objection to the initial offer was that the retail bondholders were not being properly compensated for relinquishing the reliable income stream they currently enjoy from the Chorus business. After the split, they will only be able to rely on those parts of Telecom subject to intense competition and constant price deflation.
S&P had already said it would downgrade "new" Telecom's rating to "A-" from the "A" rating Telecom currently enjoys. The revised offer means bondholders are being offered reasonable protection against further ratings downgrades.

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18 hours ago Steve Wright
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20 hours ago Backstage
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