Telecom increases consent payment for New Zealand dollar bonds

By Jennifer Chiou

New York, Sept. 21 - Telecom Corp. of New Zealand Ltd.'s TCNZ Finance Ltd. announced that it has augmented the consent fee it is offering to holders of its New Zealand dollar bonds to 0.5% from 0.25% of the scheduled redemption amount.

In addition, if Telecom's credit rating from Standard & Poor's falls to BBB+ and its credit rating from Moody's falls to Baa1, the company proposes that the interest rate for the bonds increases by 0.5% per year at the date of the issuer's previously announced demerger.

The company launched on Aug. 31 a separate solicitation of consents to waive any event of default that may occur as a result of the demerger into Telecom, a telecommunications and IT services company, and Chorus Ltd., a fixed-line access network infrastructure company.

According to a 6-K filing with the Securities and Exchange Commission, if Telecom's credit rating from S&P falls to BBB or lower and from Moody's falls to Baa2 or lower, the company is proposing a further interest increase of 0.5% per year.

"Following discussions with major stockholders, in return for their support of this proposal, we have agreed to increase the consent fee and provide an increase in the interest rate paid on the existing stock in the event that both Standard & Poor's and Moody's decrease the credit rating of Telecom below the 'A band'," Nick Olson, chief financial officer, said in the filing.

"While Telecom intends to adopt a capital structure consistent with maintaining an 'A band' credit rating post demerger, the potential coupon increase component of the proposal adds an additional level of comfort for [holders]," Olson said.

The New Zealand Guardian Trust Co. Ltd., the trustee, is required to approve the terms of Telecom's proposed demerger.

A meeting is set for Sept. 30, and consents are due two days earlier. The solicitation began on Sept. 13.

Provided the extraordinary resolution is passed, any holders who have already voted in favor of the extraordinary resolution will automatically receive the higher consent fee of 0.5% if the proposed demerger of Telecom occurs, the 6-K added.

Assuming closing of the demerger, holders may require Telecom to repurchase the securities at 101, according to the bond indenture.

The company has concurrent solicitations for other series of its notes. As reported, it has already received tender instructions from holders of more than 75% of its CHF 200 million of 4.375% notes due 2012 voting in favor of the proposed extraordinary resolution.

Also, the company said on Sept. 14 that it received consents from holders of more than 75% of each of its £125 million of 5.625% notes due 2018 and £150 million of 5.75% notes due 2020.

Details are available at http://investor.telecom.co.nz. Questions may be directed to Andrew Hopkinson at 64 27 249 5678.

The telecommunications company is based in Auckland, New Zealand.

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