Cathay Pacific unveils govt-backed HK$40bn restructuring
Cathay Pacific has announced a recapitalisation proposal worth almost HK$40 billion with government providing funds in exchange for a stake in the company as the Hong Kong flag carrier moves to save its struggling business crippled by the coronavirus pandemic.
In a filing to the stock exchange, Cathay said the government will lend HK$7.8 billion to the company and buy its special shares worth HK$19.5 billion.
Under the proposal, the government can appoint two observers to the board, and they will have access to management and information as long as the administration remains a holder of the special shares or the loans remain outstanding.
Cathay chairman Patrick Healy said in a statement that it was grateful for the government's support which allows the airline to maintain operations and continue to contribute to Hong Kong's international aviation hub status.
The Financial Secretary, Paul Chan, was to meet the media later on Tuesday to unveil the details.
Cathay is also raising HK$11.7 billion from existing shareholders in a rights issue. For every 11 Cathay shares, shareholders are required to buy seven rights shares at a subscription price of HK$4.68 each. Cathay shares closed at HK$8.81 on Monday.
The airline’s major investors, Swire Pacific, Air China and Qatar Airways have agreed to top up their holdings.
Cathay also said it intends to implement a further round of executive pay cuts and a second voluntary leave scheme for employees.
“Tough decisions will need to be made in the fourth quarter of this year to get Cathay Pacific to the right size and shape in which to compete successfully and thrive in this new environment," said Healy in the statement, while predicting a bright future in the long-term with an "unrivalled position in the Greater Bay Area".
The airline reported an audited loss of HK$4.5 billion in the first four months of this year. It has grounded almost its entire fleet.
In the first four months of this year, the number of passengers carried by the Cathay Pacific Group dropped by 64.4%, as compared to the same period last year.
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