Cathay Pacific proposes $774mn bond amid ongoing cash burn

Cathay Pacific (CX, Hong Kong Int’l) plans to issue convertible bonds denominated in Hong Kong dollars with a maturity of five years, “to professional investors”, it announced in a Stock Exchange of Hong Kong filing on January 27. Two days earlier, the airline warned in a statement that if the special administrative region’s government goes ahead with plans to enforce a two-week quarantine for all incoming flight crew, it may have to cut passenger capacity by 60% and cargo capacity by 25%. Such a rule may also increase its monthly cash burn from the current HKD1 billion to HKD1.5 billion Hong Kong dollars (USD129-193 million) to up to HKD1.9 billion (USD245 million), it protested. “The new measure will have a significant impact on our ability to service our passenger and cargo markets,” Cathay said in the statement. Cathay Pacific plans to sell HKD6 billion (USD774 million) of its newly proposed bonds, due in 2026, but that amount could rise significantly, two sources told Reuters on condition of anonymity. The proceeds would provide funding for general corporate purposes, although Cathay cautioned that a deal was not guaranteed. According to International Financing Review, the bonds would have a yield to maturity of 2.25% to 2.75% and a conversion premium of 30% to 40%.