Financial News
Written by: Zhang Weilun
2020-06-09 10:43
Last update date: 2020-06-09 11:46Cathay Pacific Airways (0293), together with its two major shareholders Swire Pacific (0019) and Air China (0753), suspended trading before the market opened, which caused a lot of speculation from market participants. "Wireless News" quoted the news that the government will rescue Cathay. The news pointed out that the government will provide Cathay Pacific with financial assistance, the form and amount of which will be announced at the press conference this afternoon.
"Bloomberg" reported that Cathay Pacific is considering raising funds, including rights issues. The report quoted a source as saying that one of the options is a rights issue; it also pointed out that the airline is negotiating with the bank and will announce it as soon as possible. The relevant terms may be changed.
Another "Bloomberg" quoted United First Partners (UFP) pointed out that the suspension does not exclude Swire's sale of Cathay Pacific to Air China, or Cathay Pacific's share placement to raise funds.
Justin Tang, head of Asian research at United First Partners, pointed out that potential transactions may occur in a sale and purchase agreement. According to the agreement, Swire may sell its shares of Cathay Pacific to Air China. It also pointed out that if relevant circumstances arise, it may cause Swire to proceed. One step reorganization.
He also pointed out that there is another possibility that Cathay Pacific may raise funds through share placement. Swire Pacific and Air China, as the two largest shareholders, believe that they will provide support.
Lending ratio reached 1.31 times eclipse 4.5 billion yuan in the first April of this year
Affected by the local demonstrations and the impact of the epidemic, Cathay Pacific, which has just stepped out of the fuel oil hedging loss, has turned bad again in the past year. Revenue in 2019 decreased by 3.7% year-on-year to 106.973 billion yuan, and profit decreased by nearly 30% to 1.691 billion yuan.
So far this year, Cathay Pacific’s operating environment has been more difficult, with a loss of 4.5 billion yuan in the first four months. The management bluntly stated that the financial prospects for the coming months will be very bleak. Since the outbreak of the New Coronary Pneumonia epidemic, many countries or places around the world have announced the closure of borders, and aviation demand has been greatly reduced. Cathay Pacific's capacity in April and May this year was only 3%, and this month it only increased to 5%.
In response to the new Coronary Pneumonia epidemic, many countries or regions have announced customs closures to crack down on air passenger demand. (Photo by Zhang Haowei)
As of the end of last year, Cathay’s net borrowings rose 40% year-on-year to 82.396 billion yuan, with a loan-to-loan ratio as high as 1.31 times. Affected by the worsening business this year, the market has long estimated that Cathay Pacific needs restructuring, or involves brand reorganization, capital injection, and even Swire sales. In fact, Akbar al-Baker, chief executive of Qatar Airways, Cathay’s third largest shareholder, “opened” last month and said he was willing to provide assistance to Cathay and even inject capital.
However, it is worth mentioning that, according to the arrangement between Swire and Air China, when the two companies each hold more than 15% of the shares of Cathay Pacific, they cannot make a full purchase to Cathay Pacific, nor can they accept a third-party full purchase unless recommended by the Cathay board of directors. , And Swire has absolute control over the Cathay Board of Directors. In other words, Cathay Pacific’s “change of the sky” requires Swire’s approval.
In order to alleviate the funding pressure, Cathay Pacific announced earlier that it will sell 6 777-300ER aircraft to BOC Aircraft Leasing (2588) to cash out 5.5 billion yuan. At the same time, the company also saves employees through measures such as layoffs and unpaid leave. Cathay Pacific announced earlier that 80% of its employees are participating in the unpaid leave program, and the closing of the North American outstation reduced a total of more than 400 staff.
Cathay Pacific Swire Air China New Crown Pneumonia