Financial News
Written by: Huang Jie
2020-06-09 14:01
Date of last update: 2020-06-09 14:02Cathay Pacific, which is in financial difficulties (0293), announced a capital restructuring plan of about 39 billion yuan, including the SAR government's capital injection into Cathay Pacific, and reaching out to existing shareholders for money. Dismantling notice, this rescue plan has the following key:
The key one: How is the 39 billion yuan fund formed?
The 39 billion yuan funds come from two main sources. On one side, the government injected nearly 28 billion yuan into Cathay Pacific. Including Aviation 2020 Limited (a company wholly-owned by the Financial Secretary Incorporated) subscribes to the preferred shares issued by Cathay Pacific with a total investment of 19.5 billion yuan; Aviation 2020 Limited provides Cathay Pacific with a transitional loan financing of 7.8 billion Hong Kong dollars.
On the other side, Cathay reached out to existing shareholders to ask for money, in the form of 7 shares for every 11 shares, and the fund-raising amount was about 11.7 billion yuan. The offer price is 4.68 yuan, a 46.8% discount from the closing price before Cathay Pacific suspended trading.
The second key point is, how much does the government hold?
According to the notice, the government will scold HK$19.5 billion for 195 million shares of Cathay Pacific preferred shares. At the same time, the government has the right to subscribe for no more than 417 million shares at a warrant exercise price of HK$4.68 (adjustable), with a total exercise price of approximately HK$1.95 billion (adjustable).
If Cathay Pacific completes the rights issue and the relevant warrants are fully converted, the government will hold approximately 6.08% of Cathay Pacific’s equity.
Key three, what is the "counting" of the government?
The government's water supply to Cathay this time, naturally the biggest financial benefit is interest income. According to the notice, the interest rate is 3% per annum from the date of issuance of preferred stocks and warrants for three years, 5% for the fourth year, 7% for the fifth year, and 7% for each subsequent year. Dividend once every six months.
In addition, the annual interest rate for transitional loan financing is 1.5% higher than the Hong Kong Interbank Offered Rate, plus the prepayment fees that must be paid for each withdrawal.
It is worth mentioning that the circular also pointed out that unless Cathay Pacific has enough distributable items to pay dividends and the board of directors decides to distribute such profits, it will not be able to pay dividends on preferred shares. Any unpaid preference shares will accumulate and constitute "dividend arrears."
Key four, what protection does the government have?
The government's purchase of Cathay Pacific preferred shares this time is different from ordinary shares. When the company distributes dividends, its priority will be higher than that of ordinary shareholders, and generally enjoy a better dividend rate. In addition, if Cathay Pacific unfortunately winds up, preference shareholders will also be higher in order of compensation than ordinary shareholders.
As for the transition loan, certain aircraft and related insurance of Cathay Pacific Group will be used as the beneficiary of Aviation 2020 Limited to provide collateral.
Key five, what is the power of preferred shareholders?
Preference shareholders have the right to attend meetings of shareholders of preference shareholders, but shareholders of preference shares have no right to convene, attend or vote at any general meeting unless the general meeting considers important resolutions involving winding up.
At the same time, as long as Aviation 2020 Limited continues to be the holder of any preferred stock or any amount under the transitional loan has not been repaid, Aviation 2020 Limited has the right to appoint two observers to attend board meetings and contact management and obtain information.
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