Dhaka: Cathay Pacific on July 13 has had its plans approved to raise a staggering USD 5 billion in funding to help the airline withstand the coronavirus crisis.
The government-backed rescue deal includes the sale of preference shares, bridging loans and warrants, and was approved during an extraordinary general meeting this afternoon.
According to reports, Cathay’s shareholders voted 99 per cent in favour of the package.
Following the vote, the company will now undertake something of an overhaul. Cathay will review everything from its fleet to its network and its staffing, in order to present a final plan for a rebirth of the airline in the post-corona world.
Prior to the vote, Patrick Healy, Chairman, Cathay Pacific, said, "The first priority was to get the recapitalisation done and it’s great to get this far and we hope to get shareholder support and then we’ll move onto the deliberations of the restructuring.”
He later indicated that the overhaul of the business would take a couple of months.
Of all the world’s airlines struggling due to the coronavirus, Cathay has been one of the worst-hit. It had already taken a knock last summer as widespread protests in Hong Kong led to travel warnings and a slump in traffic levels.
Since then, it has been coping with border closures, decreased travel demand, and the prospect of the situation persisting for some time to come.
When the recapitalisation plan was announced last month, Healy had said it was the only way to save the airline from collapse. Now, with the approval vote, we can add some more color to how the airline will look in the future.
In total, Cathay will sell USD 2.25 billion of preference shares along with USD 251.2 million of warrants to the Hong Kong government.
As a result, the government will become a shareholder to the tune of 6.08 per cent of the company.
Simultaneously, the government’s investment vehicle, known as Aviation 2000, will inject USD 1 billion to Cathay in the form of a loan.
A further USD 1.5 billion is expected to be raised through sales of shares to existing shareholders, known as a rights issue.
In a circular sent to shareholders last month, Cathay had said that the bailout would keep it going for at least 12 months. However, it remains to be seen whether the impacts of COVID have been mitigated sufficiently within that time frame.