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Telecom gains consent from holders of sterling bonds to swap for Chorus notes

Wednesday 14th September 2011

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Telecom Corp. has gained approval from holders of two issues of British pound-denominated bonds to exchange the securities for notes in its Chorus network business once New Zealand’s biggest phone company is split in two.

Consent was required because the demerger may have resulted in a default event under the terms of the bonds’ trust deed.

The Auckland-based company said it had consent from the required 75% of the holders of its 125 million pounds of 2018 notes and 150 million pounds of 2020 notes to exchange the debt for Chorus bonds maturing in 2020.

Bond holder consent is but one part of the approvals process for Telecom, whose shareholders are to vote on the plan at their annual meeting in October.

Telecom released documents yesterday showing that splitting the company into its retail and network businesses may cost as much as $150 million.

Those costs are outweighed by the benefits of Telecom splitting its business, letting the new retail arm shed its regulatory burdens and providing Chorus with a $929 million injection to build the majority of a nationwide broadband network, the papers say.

Independent adviser Grant Samuel said the value of cooperating with the government and carving up the business was some $500 million, or 28 cents per share, in its report on the demerger.

Telecom shares fell 0.4% to $2.505 on the NZX today.


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