STOCKWATCH C&W gains on 'creative' convertible bond issue on PCCW shares

LONDON (AFX) - Shares in hard-pressed telco Cable & Wireless PLC gained in early trading on a "creative" move to issue a convertible zero-coupon bond to get rid of its 14.7 pct holding in Pacific Century CyberWorks, dealers said.	    At 8.43 am, Cable & Wireless shares were up 11 or 2.21 pct at 486, of a high of 494.	    C&W has been under pressure since it gave a profit warning earlier this month, warning that U.S. and Japanese revenues have been falling under the onslaught of plummeting tariffs for international and data traffic. The news saw C&W stock plummet to 478 pence from 683 in just two sessions.	    But this morning's bond issue, raising about 1.5 bln usd and rated A2 at Moody's and A at Standard & Poor's, is a sign of solid shareholder-aware thinking by C&W's management, dealers said.	    "It's a wonderful idea, and a very creative move," said one dealer.	    "It offers downside protection of about 10-12 pct and it liquidates a holding which some people were worried might end up not being worth anything at all."	    Moves like this should return some confidence in C&W, he said, and heighten expectations of a share buyback which will protect the company from a hostile bid and encourage shareholder sentiment.	    A "Dutch auction" to buy back 30-40 pct of shares would be wise, he suggested, denying the possibility of a special dividend as "not tax-efficient". "A share buyback isn't going to put a dent in their ability to acquire," he said.	    SG Securities and ABN Amro reiterated their 'buy' advice on C&W this morning, setting a 680 pence sum-of-the-parts valuation on the company.	    Support also came from Taco Sieburgh at Commerzbank, who last week co-authored a note pointing out that following the sale of C&W Optus to Singapore Telecom, the share price and the 8-9 bln stg in cash and semi-liquid assets makes C&W an attractive candidate for takeover and possible breakup.	    The note suggested that the next 12-24 months is the window of opportunity should a predator want to make a move.	    "C&W's management has not received the accolades for the acquisitions it hasn't made," when prices were sky-high early last year, he pointed out.	    C&W needs to buy a U.S. web hosting company, but none of the candidates on offer will soak up more than 1-2 bln stg, Sieburgh said. He, too backed a share buyback, saying that with this much cash on the balance sheet any capex and operating needs are well met. 

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