Cathay Pacific is issuing HK$6.74 billion ($869 million), 2.75% guaranteed convertible bonds due 2026.
Details of the bonds were disclosed in a 28 January filing to the Hong Kong stock exchange, after the carrier indicated on 27 January plans for the issuance, to raise funds for general corporate purposes.
The bonds, which are sold at par, will be issued by an entity called Cathay Pacific Finance III.
The initial conversion price is HK$8.57 per conversion share, a 30% premium over the last closing price of HK$6.59 per share on 27 January.
As of 28 January, Swire Pacific holds 45% of Cathay Pacific’s issued share capital, Air China holds just under 30%, Qatar Airways Group holds nearly 10%, and other shareholders hold 15%.
As part of Cathay Pacific’s recapitalisation plan approved by shareholders in July, Aviation 2020, which is 100% owned by the Hong Kong government, acquired warrants that when fully subscribed give it 6.08% of Cathay’s issued shares.
On that basis, if all the bonds were converted, Swire Pacific’s shareholding in Cathay Pacific would be further diluted to 37.9%, Air China to 25.3%, and Qatar Airways Group to 8.4%. Aviation 2020’s 6.08% stake from the warrants, which were issued on 12 August and have a five-year validity period, would be diluted to 5.45%.
The conversion period of the bonds is from 18 March 2021 up to the close of business on the tenth day before the maturity date of 5 February 2026.
The bonds will be issued in denominations of HK$2 million each and integral multiples in excess thereof. Coupon payments will be made semiannually.
BNP Paribas Securities (Asia), BOCI Asia, HSBC and Morgan Stanley & Co are the joint lead managers and joint bookrunners of the issue.
Cathay Pacific states, “The board considers the issuance of the bonds to be an opportunity to further strengthen the company’s liquidity and working capital position and which allows the company to better navigate the challenges posed by the Covid-19 pandemic.”