Cathay shareholders approve US$5 billion bailout to avoid collapse
HONG KONG's Cathay Pacific Airways' shareholders approved a plan to raise HK$39 billion (US$5 billion) in a government-backed rescue that includes the sale of preference shares and a rights issue, reports Bloomberg
HONG KONG's Cathay Pacific Airways' shareholders approved a plan to raise HK$39 billion (US$5 billion) in a government-backed rescue that includes the sale of preference shares and a rights issue, reports Bloomberg.
When the recapitalisation plan was announced last month, Cathay chairman Patrick Healy said it was the only way to save the airline from collapse. Cathay's main shareholders Swire Pacific, Air China and Qatar Airways said then they would vote in favour of the plan.
Cathay will sell HK$19.5 billion of preference shares with HK$1.95 billion of warrants to the Hong Kong government, which will own 6.08 per cent of the carrier through a connected entity called Aviation 2020 and have two observers on its board. Aviation 2020 is extending a HK$7.8 billion bridge loan. Cathay plans to raise about HK$11.7 billion through the rights issue.
As the controlling shareholder with a 45 per cent stake, Swire abstained from voting in favour of the resolution relating to the rights issue, in accordance with listing rules, Cathay said in its statement.
The airline has been losing more than HK$2 billion a month since February as the coronavirus outbreak wiped out passenger demand globally and grounded fleets, hitting Cathay particularly hard because it has no domestic market to fall back on in Hong Kong.
Cathay already was in plenty of financial difficulty as social unrest in Hong Kong triggered a steep drop in traffic, prompting it to issue profit warnings in the second half of 2019, before Covis-19 erupted and further decimated travel.