CTC bondholders approve mobile sale

- Tuesday, July 20, 2004

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Investors holding bonds issued by Chilean telco Telefónica CTC Chile (NYSE: CTC) have approved the sale of the company's mobile unit Telefónica Móvil but insisted on a new interest rate for the bonds, local press reported.

The bondholders succeeded in negotiating a premium of 50 basis points on top of the previous interest rate, above CTC's initial offer of 3.5 points.

For those bondholders who believe the company will lose value by selling Telefónica Móvil, CTC offered to buy back their bonds on October 15 at face value plus interest due at the 6% interest rate stipulated on issue. However, the bonds are trading with an interest rate of 4.6%, so investors are unlikely to sell, according to CTC chief financial officer Julio Covarrubias.

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In a meeting on Monday (June 19) it came to light that one clause in the contract under which the bonds were issued could jeopardize the sale because of its ambiguity. The bondholders therefore agreed to modify the clause so that bondholder approval is now required for the sale of company assets equivalent to more than 20% of total asset value, except in cases where the assets are being transferred to company affiliates.

CTC's bondholders hold debt worth US$22mn.

Since CTC shareholders approved the Telefónica Móvil sale last Thursday the firm's ADRs have lost 4.8% of their value, settling on Monday at around US$11.90.

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