Telekom Malaysia Bhd has opted to raise debt through a ringgit bond issue, rather than a foreign currency issue, to fund its takeover of Celcom (Malaysia) Bhd, according to sources familiar with the deal.
“Telekom is trying to limit its foreign currency exposure. It has total investments plus shareholders advance and corporate guarantees abroad of about US$880mil,” one source, who declined to be identified, told Reuters yesterday.Another source said that the issue, likely to be among Malaysia’s largest this year, was currently being rated. “There are hopes for an AAA rating,” the source said.
Debt newspaper BasisPoint, a Reuters unit, had reported in January that Telekom would raise RM3.75bil to RM4bil via a bond issue to fund the Celcom deal.
It said the bonds would replace the RM4bil bridging loan Telekom was believed to have put in place for its Celcom offer.
But Telekom has denied that report, saying that it has not decided on the securities it would issue to finance the deal.
In October last year, Telekom struck a deal with Celcom to create the country's largest mobile group. Telekom agreed to sell its mobile arm TM Cellular Sdn Bhd to Celcom in return for new Celcom shares worth RM1.68bil.
The Telekom-Celcom union, which is expected to capture at least 40% of the market’s 8.6 million customers, is likely to be completed by next month.
Sources told Reuters last month that Commerce International Merchant Bankers Bhd had secured the mandate for the deal. Deutsche Bank has been reported to be the other likely co-arranger.
Celcom chairman Datuk Dr Munir Majid, meanwhile, said in a statement that the group, a wholly owned subsidiary through an internal restructuring of Technology Resources Industries Bhd (TRI), is now fully recapitalised, refinanced and reorganised to move forward.
He said Celcom was prepared to compete in Malaysia's increasingly competitive communications industry.
“Today with the backing and support of Telekom Malaysia Bhd which holds a 31.25% equity interest in Celcom, making it the largest single shareholder, Celcom is in an even stronger position in the industry. Celcom is in many respects, a whole new company,” a Bernama report quoted him as saying.
The successful recapitalisation programme of TRI, which turned out to be the largest and best performing Asian equity deal, had bagged Asiamoney's “Most Innovative Deal of the Year” award this year.