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HKT Trust Plans Rights Issue -- 2nd Update


By Prudence Ho and Isabella Steger

A telecom trust controlled by Hong Kong billionaire Richard Li is raising about 7.9 billion Hong Kong dollars (US$1 billion) from a rights issue, a move analysts say will calm investor concerns about how the trust would repay the loan it took out to buy a mobile-phone operator.

HKT Trust, a subsidiary of Hong Kong fixed-line telecom company PCCW Ltd., said Friday it plans to issue about 1.16 billion rights share-stapled units at HK$6.84 per unit, representing just more than a 20% discount from its Thursday closing price of HK$8.62. Mr. Li owns PCCW, which controls 63% of HKT Trust.

HKT Trust was the first Hong-Kong listed company to seek a share-stapled unit structure to raise US$1.2 billion in November 2011. These stapled securities, which comprise units in the trust as well as shares in the company that holds the trusts' underlying assets, are subject to Hong Kong's securities regulations. This gives investors the same level of protection as shareholders of a listed company.

PCCW said it would take up its full share of rights entitlements, or 728 million units. The joint-underwriters-- Citigroup Inc., Deutsche Bank AG, Goldman Sachs Group Inc., HSBC Holdings PLC, Morgan Stanley and Standard Chartered-- will take up any unsold units from unit holders.

"We believe the latest announced rights issue should remove the overhang related to financing of the CSL acquisition," said in a report of Macquarie Friday.

In May, HKT Trust closed a $2.43 billion deal to buy Hong Kong mobile-phone operator CSL Ltd. from Australia's Telstra Corp. HKT Trust took out an 18-month, US$2.5 billion bridge loan to fund the purchase, it said in December.

Raising funds through a rights issue is rare among Hong Kong trusts, as fewer trusts are listed in Hong Kong compared with exchanges such as Singapore. There, the practice is more common, as a center for trusts in the region.

HKT Trust is up 82% since it went public, as yield-hungry investors have been eager to put their money in trusts, which tend to pay steady and high dividends, in a low-interest-rate environment.

HKT Trust said it plans to use the proceeds to pay down debt. The long-term borrowings--mainly composed of two-to- five year debt--rose to HK$24 billion last year from HK$15.6 billion a year earlier, according to annual report.

HKT Trust closed down 4.3% at HK$8.25.

Write to Prudence Ho at prudence.ho@wsj.com and Isabella Steger at isabella.steger@wsj.com

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