Telecom Argentina obtains consents for 87% of debt in APE solicitation

New York, Aug. 9 - Telecom Argentina SA said it received consents from holders of 87% of its debt for a restructuring of all its outstanding unsecured debt under an Acuerdo Preventivo Extrajudicial.

The solicitation of consents to the APE expired on Aug. 6 although the company said it will accept additional consents up to Aug. 13, subject to securities laws.

As of Dec. 31, 2003, Telecom Argentina had $2.801 billion equivalent of debt outstanding, including accrued interest, penalties and default interest.

Covered by the solicitation are Telecom Argentina's medium-term notes series C due 2002, series E due 2005, series 1 due 2003, series 2 due 2004, series I due 2005, series K due 2002, series F due 2007 and series H due 2008.

Under the proposed restructuring, Telecom Argentina will issue $2.701 billion of new debt.

The company will capitalize part of the accrued but unpaid interest for the period June 25, 2002 through Dec. 31, 2003 using a factor of 1.058.

Accrued interest since Jan. 1, 2004 will be paid on the date the new notes are issued at a rate of 5.53% for new dollar-denominated series A notes, 4.83% for new euro-denominated series A notes, 1.93% for new yen-denominated series A notes, 3.23% for new peso-denominated series A notes, 9% for series B notes or, for holders who receive cash, a payment based on the interest the company has earned on the $663 million of available cash in option C since Jan. 1.

Holders of Telecom Argentina's existing debt had the choice of three options:

* Option A: step-up notes due 2014 with an initial coupon of 5.53% for dollar notes, 4.83% for euro notes, 1.93% for yen notes and 3.23% for peso notes from Jan. 1, 2004 through Oct. 15, 2008, then 8% for dollar notes, 6.89% for euro notes, 3.69% for yen notes and 3.42% for peso notes for Oct. 16, 2008 through Oct. 15, 2014.

For each 1,058 principal amount of outstanding notes in the various currencies holders will receive the same amount of new notes, including the capitalized interest factor. Holders can receive the notes in the same currency as the existing debt or denominated in dollars.

* Option B: step-up notes due 2011 with an initial coupon of 9.0% from Jan. 1, 2004 through Oct. 15, 2005, 10% from Oct. 16, 2005 through Oct. 15, 2008 and 11% from Oct. 16, 2008 through Oct. 15, 2011.

For each 1,058 principal amount of outstanding notes in the various currencies holders will receive par in new notes or, for euro-, peso- and yen-denominated securities, 94.5% of par of new notes, including the capitalized interest factor. The series B notes will only be denominated in dollars.

If option C is undersubscribed, holders who choose option B will have up to 37.5% of their principal and interest transferred to option C.

* Option C: cash at a price from 740 to 850 per 1,058, including the capitalized interest factor, as determined under a modified dutch auction. Cash can be in the same currency as the existing notes or in dollars. Telecom Argentina will spend up to $825 million on this option.

The APE solicitation will be subject to holders of at least $300 million of existing debt selecting option A.

A maximum of $1.376 billion of outstanding debt including capitalized interest can be retired under option B.

Up to 37.5% of the debt tendered under option B can be reallocated to option C if option C is not fully subscribed.

A maximum of $825 million of outstanding debt, including capitalized interest, can be retired under option C.

The company will need the necessary support of the necessary majorities for the APE as required by Argentine bankruptcy law, judicial approval of the APE, the completion of the debt restructuring of Telecom Personal and other conditions.

Morgan Stanley (800 624-1808 or call collect 212 761-2219) and MBA Banco de Inversiones SA (+5411 4319 5800) are solicitation agents.

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