Chorus makes first draw-down on govt UFB fund
By Paul McBeth
April 12 (BusinessDesk) – Chorus, the fibre network company spun out of Telecom, has made its first draw-down on the
government’s ultra-fast broadband programme funding to build high-speed internet links in Auckland’s Albany and Rosebank
areas.
The Wellington-based company received some $3.9 million from Crown Fibre Holdings, the entity tasked with overseeing the
network roll-out, to pay for the extension of high-speed internet services to about 3,400 premises, it said in a
statement. Chorus issued some 1.9 million equity securities and 1.9 million debt securities at $1 apiece, and also
issued 83,000 warrants for nil consideration to complete the transaction.
Under the terms of the deal, the number of securities issued is calculated on the basis of $1,118 for each premise
Chorus passes with the UFB network, split 50/50 between debt and equity.
The equity securities don’t carry voting rights, and entitle the government to receive dividends after 2025, equal to
the 180-day bank bill rate plus a margin of 6 percent per annum. Chorus isn’t obliged to declare dividends, but it can’t
pay a return to holders of its regular stock without paying out on the CFH securities.
The debt securities are unsecured and don’t bear interest. Chorus is required to redeem them in tranches from 2025 to
2036 at the latest, though if uptake isn’t as fast as expected it will have to repay the debt at a faster pace.
The warrants let CFH participate in any upside to Chorus’s stock if the shares exceed total shareholder return of 16
percent per annum, with the exercise dates expected between 2025 and 2036.
Chorus can tap the government agency for up to $929 million to build the national network in a deal that differs from
other arrangements in that the network company receives the investment directly rather than through a local fibre
company. In the Telecom demerger document, the company flagged it will draw down $167 million in the 2013 financial
year.
The former Telecom unit won the bulk of the government’s $1.35 billion plan to roll-out a nationwide broadband network
last year, after the phone company agreed to carve out Chorus as a separate entity.
Shares in Chorus slipped 0.3 percent to $3.44 in trading yesterday, and have climbed 17 percent since listing in
November.
(BusinessDesk)