(Since their isn't much going on, I may as well post this article from Rueters on the debt buyback offer. I love this company, and I wish it were true, but I have a hard time believing a quote from a CTEL official that the reason for the buyback was "....we are generating substantial free cash flow beyond our organic needs,....". I guess this is true if the money needed to expand the HK network over the next three years isn't considered an "organic need".)
City Telecom launches bond HKD 10:33 PM ET 7/13/08
HONG KONG, July 10 (Reuters) - City Telecom, a Hong Kong-based fixed line operator 1137.HK, says it is buying back up to $89.4 million of its bonds to utilise some spare cash.
The company said it was buying back its dollar bonds due in 2015 178677AB6=RRPS and also paying its bondholders a fee for allowing amendments to some of the bond covenants.
It is paying bondholders US$980 for every US$1,000 due in principal amount. The payment includes US$20 paid as a consent payment.
"The reason for the bond buyback is to reduce the negative carry on our bonds, as we are generating substantial free cash flow beyond our organic needs," a company official told Reuters in an emailed response on Wednesday.
The bonds are not actively traded but, according to Reuters data, the bonds were quoted at 93.50/94.50 cents to a dollar on Wednesday for a yield of around 10 percent.
Analysts said the buyback could lower the company's funding cost and the changes in the bond covenants would remove financial restrictions.
"The company might be able to reduce its financing cost, currently 8.75 percent per annum, through refinancing," said Jinqing Li, credit analyst with Fitch Ratings. "
Last month, the agency revised the outlook on City Telecom's BB-minus to positive from stable.
"The positive outlook could lead to a rating upgrade if CTI is able to demonstrate its ability to record steady subscriber growth while maintaining its current 30 percent EBITDA margin over the next 12 to 24 months," Fitch said. (Reporting by Umesh Desai; Editing by Anne Marie Roantree)