LONDON – Cathay Pacific Airways (CX) announced that the company’s shareholders approved a plan to raise US$5bn (HK$39bn) in a government-backed rescue that includes the sale of preference shares and a rights issue.
The airline said in a statement following a general meeting that all resolutions put to vote were approved.
Following the announcement of the recapitalization plan last month, Cathay Chairman, Patrick Healy, said it was the only way to save the airline from collapse. All three of Cathay’s main shareholders (Swire Pacific Ltd, Air China [CA] Ltd and Qatar Airways [QR]) said they would vote in favor of the plan.
The airline will sell US$2.52bn (HK$19.5bn) of preference shares with US$251.2m (HK$1.95bn) of warrants to the Hong Kong Government.
The Hong Kong government will own 6.08% of the airline through a connected entity called Aviation 2020. The government will also have two observers on the airline board.
Aviation 2020 is extending a US$1bn (HK$7.8bn) bridge loan. The airline plans to raise approximately US$1.5bn (HK$11.7bn) through the rights issue.
The airline said in its statement as the controlling shareholder with a 45% stake, Swire abstained from voting in favour of the resolution relating to the rights issue in accordance with listing rules.
Lack of Fall Backs
Cathay Pacific has been losing more than US$258m (HK$2bn) each month since February as a result of the coronavirus pandemic. The lack of demand for global travel and grounded fleets has hit Cathay particularly hard as there is no domestic market in Hong Kong for the airline to fall back on.
The airline was already in financial difficulty as the social unrest in Hong Kong led to a steep drop of traffic which was echoed by the company issuing profit warnings in the second half of 2019.