Esat BT seeks to buy back bonds worth € 344.5m

Esat BT, the second-biggest fixed-line telecoms company in the Republic, is seeking to buy back bonds worth about €344.5 million in a transaction backed by its parent firm, British Telecom.

Esat BT is tendering to buy back its $160 million (€164.6 million) bond due 2008 and its €179.9 million euro bond due 2009, British Telecom said in a statement yesterday. The transaction, if taken up fully by bondholders, will save Esat BT €21 million in annual interest payments, according to Mr David Sams, international treasurer at British Telecom.

He said the proposed bond buyback by Esat BT was a "tidying up exercise" of debt which had been inherited as part of British Telecom's acquisition of Esat.

Both the dollar and the euro bonds are subject to interest at 11.875 per cent. They were issued before British Telecom's acquisition of a majority stake in Esat in 2000.

Along with the tender offer for the bonds, Esat BT is also seeking amendments to the indenture under which the bonds were issued. "We are asking for a relaxation of the reporting requirements and certain covenants relating to Esat's ability to find extra financing or make certain payments," said Mr Sams.

Currently, Esat BT has to issue quarterly financial updates to the Securities and Exchange Commission (SEC). This requirement would be removed under Esat BT's proposed bond buyback plan. The bond buyback would cost British Telecom up to €401.5 million if it were fully taken up by bondholders due to the premium which it is offering bondholders.

The total purchase price for each $1,000 of the dollar bonds tendered will be based on a 75 basis point fixed spread over the yield of the 3 per cent US treasury bond due November 30th, 2003. Analysts said that amounted to an offer of around 117 per cent of the face value of the dollar bonds.

The total purchase price for each €1,000 principal amount of the euro bond tendered will be based on a 75 basis point fixed spread over the yield of the 4 per cent German government bond due June 25th, 2004.

The spread will be determined on the second business day before September 23rd, the expiration date of the tender offer. Bondholders offering their notes before September 9th will be eligible to receive a consent payment of $25 or €25 per $1,000 or €1,000 of bonds for tendering early, according to British Telecom.

Esat would pay accrued interest to the date of purchase, said British Telecom. The completion of the tender offer is subject to Esat BT receiving tenders representing at least a majority of the amount of the outstanding bonds.

Meanwhile, Esat BT confirmed yesterday that its chief executive, Mr Bill Murphy, had been appointed managing director, BT Regions, including BT Northern Ireland. Mr Murphy will retain his role as chief executive at Esat BT.