Cathay Avoids Collapse With $5 Billion Government-Backed Plan

- Advertisement -
- Advertisement -
- Advertisement -
- Advertisement -

Cathay Pacific Airways Ltd. became the latest global carrier to receive a lifeline to get through the coronavirus pandemic, with the chairman saying its plan to raise HK$39 billion ($5 billion) from the Hong Kong government and shareholders was necessary to avoid collapse.

The beleaguered airline will sell HK$19.5 billion of preference shares along with HK$1.95 billion of warrants to the government. It also proposed a rights issue, reported earlier Tuesday by Bloomberg News, to raise about HK$11.7 billion. The plans are subject to shareholder approval at an extraordinary general meeting around July 13.

A government-connected entity called Aviation 2020 Ltd. also is extending a HK$7.8 billion bridge loan, the carrier said. The government will own 6.08% of Cathay through Aviation 2020 after the deal and have two observers on its board. The airline will cut executives’ salaries and offer more unpaid leave to its workers, and job cuts are possible.

“The reality is that the recapitalization plan announced today is basically the only plan available to Cathay Pacific,” Chairman Patrick Healy said. “The alternative would have been a collapse of the company.”

Airlines around the world have been searching for funds after the coronavirus wiped out passenger demand and grounded fleets. Governments have devoted more than $85 billion to propping up the industry, including the major U.S. carriers and Germany’s Deutsche Lufthansa AG, which secured about $10 billion in state support. Even so, global air traffic may only get back to 50% to 60% of usual levels by year-end.

“With the participation of the Hong Kong government in its capital reorganization, the firm will be kept out of troubles like a cash squeeze at least in the coming months, and both its financial strength and credit rating will get a boost,” said Steven Leung, executive director at UOB Kay Hian (Hong Kong) Ltd.

Cathay and main shareholders Swire Pacific Ltd. and Air China Ltd. suspended trading Tuesday, pending the announcement, and will resume Wednesday. Air China owns about 30% of Cathay, while Swire Pacific has a 45% stake. Qatar Airways holds 9.99%. All three have undertaken to vote in favor of all resolutions for the recapitalization plan.

This article was originally posted on finance.yahoo.com/news/.
Home of Science
Follow me

- Advertisement -

Discover

Sponsor

Latest

Twitter CEO sets aside $1 billion in Square equity for charity, coronavirus relief

KEY POINTS Square and Twitter CEO Jack Dorsey has said he is donating $1 billion in Square equity to support relief efforts for the...

Airlines Surge Toward Best Week Ever, and Trump Needles Buffett

U.S. airline shares headed for a record weekly gain as investors bet that travel demand was poised to rebound.American Airlines Group Inc. and United...

What You Should Know About Netflix and Streaming TV

What You Should Know About Netflix and Streaming TVNo one is going to question the fact that there are lots of movies and...

Business Plan Template – Improves Your Business With a Business Plan Template

When it comes to a business plan, every business entrepreneur wants the best template to use. What about when your existing business and planning...

U.S. small business program handed out virus aid to many borrowers twice

A technical snafu in a U.S. government system caused many small businesses to receive loans twice or more under a federal aid program to...
Home of Science
Follow me