TLS 0.52% $3.86 telstra corporation limited.

tls refinancing reach

  1. 4,005 Posts.
    TELSTRA CORPORATION LIMITED. 2003-04-14 ASX-SIGNAL-G



    HOMEX - Melbourne



    +++++++++++++++++++++++++

    Telstra today announced that Reach Ltd, the 50/50 Asian

    infrastructure joint venture with PCCW Limited, had agreed with its

    banking syndicate new terms for its US$1.5 billion loan facility,

    subject to finalisation of satisfactory documentation.



    The key elements of the new arrangements are as follows:



    * Telstra and PCCW will enter into capacity prepayment arrangements

    with Reach to an amount of US$286 million (US$143 million each);



    * This amount, together with a drawdown from Reach's own cash

    reserves, will be used by Reach to repay US$300 million of the loan

    principal (reducing the loan outstanding to US$1.2 billion), and to

    place US$50 million into escrow for possible future working capital

    and interest payment purposes;



    * No further scheduled repayments of principal until 31 December 2010

    at which time the balance will be due in full;



    * Removal of all financial ratio covenants;



    * Reach will provide security to its banking syndicate but the loan

    remains non-recourse to Reach's shareholders;



    * Interest on the remaining loan to be set at LIBOR plus 250 basis

    points (with a step up on 1 January 2008 to 350 basis points unless

    the loan balance has reduced to less than US$900 million);



    * Telstra and PCCW will commit to buying a minimum of 90 percent of

    their relevant international capacity requirements from Reach at

    benchmarked arms length prices until the loan is repaid by Reach;



    * Prior obligations between Reach and the Australian-Japan Cable

    consortium remain unchanged; and



    * Excess Reach cash flow will be shared between the banks (as to 50

    percent), in the form of early principal repayment, and the

    shareholders (as to 25 percent each), in reducing the outstanding

    capacity prepayments after which excess cash flows will be directed

    to repayment of remaining principal.



    Telstra Chief Executive Officer, Ziggy Switkowski, said these new

    arrangements provided Reach with the financial flexibility to

    continue as the leading Asian regional operator for voice and data

    connectivity services, while enabling a progressive return to

    improved financial results sufficient to meet the requirements of the

    new terms within the prescribed seven year period.



    "Telstra is pleased that Reach and its banks have concluded the

    revised loan arrangements which accept the changed circumstances of

    the industry in which Reach operates," he said.



    Dr Switkowski reiterated the importance of the Reach operations,

    telecommunications products and services, and reaffirmed Telstra's

    support for Dick Simpson, Reach CEO, and his team as they work to

    compete in this difficult business sector, and lift operating

    performance.



    The consequences of the new loan arrangements for Telstra are as

    follows:



    * Telstra and PCCW remain 50/50 shareholders in Reach;



    * The contribution by Telstra to the capacity prepayment will be

    funded from the partial early redemption of the US$190 million

    converting note Telstra holds in PCCW. The balance of the

    converting note will then stand at about US$54 million (including

    capitalised interest) substantially the same terms as the original;



    * These related transactions mean that there is no new cash outlaid

    by Telstra to finance these revised arrangements; and



    * The capacity prepayment can be treated as an asset in Telstra's

    accounts.



    Telstra Chief Financial Officer, David Moffatt, acknowledged the

    constructive process of negotiation with the banks, which led to the

    agreement between Reach and its lending syndicate.



    "Reach now has an appropriate capital structure to enable it to face

    the future with confidence," he said.



    He further noted that Telstra's balance sheet and financial settings

    are unchanged as a result of these new arrangements.



    Telstra Media Contact



    Stephen Morrison

    03 9634 5611 or 0417 053 501

    [email protected]
 
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