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[Cathay Pacific suspension] Hong Kong government pumps nearly 30 billion yuan to save Cathay

2020-06-10T00:00:42.025Z


Cathay 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


Financial News

Written by: Huang Jie

2020-06-09 14:01

Date of last update: 2020-06-09 14:28

Cathay 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, including Aviation 2020 Limited (a company wholly-owned by the Financial Secretary Incorporated) subscribed for preferred shares issued by Cathay Pacific and involved a total of 19.5 billion yuan; Aviation 2020 Limited provided a transition to Cathay Pacific Loan financing, involving 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, subscribe to Cathay Pacific’s 195 million preferred shares at a price of RMB 100 per preferred share.

On the other side, the government has the right to subscribe for not 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 annual interest rate for the three years from the date of issuance of preferred shares and warrants is 3%, the fourth year is 5%, the fifth year is 7%, and thereafter it is 9% per year. Breath once.

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."

The government's purchase of preferred shares of Cathay Pacific this time will give priority to "sack" when the company distributes dividends. ﹙Profile picture﹚

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.

Cathay Pacific Cathay Pacific

Source: hk1

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