Linklaters counselled Cathay Pacific on its HK$39 billion (US$5 billion) recapitalization proposal.
The transaction involved: a proposed issuance of preference shares and warrants to the Hong Kong government to raise about HK$19.5 billion; a proposed rights issue of ordinary shares to raise about HK$11.7 billion; and a proposed bridge loan facility of about HK$7.8 billion to be made available by the Hong Kong government.
The carrier’s two largest shareholders will see their stakes trimmed following the recapitalization, with Air China’s falling from 29.9% to 28%, and Swire Pacific’s from 30% to 28%. Qatar Airways’ shareholding will be cut from 9.9% to 9.3%.
The recapitalization was deemed essential by the carrier due to a series of unexpected events outside its control. Cathay was devastated by the COVID-19 pandemic, like the rest of the airline industry, but has experienced a double blow with months of ongoing democracy protests in Hong Kong that have hurt the carrier. Travel restrictions imposed by various governments have also led to significantly reduced inbound and outbound passenger traffic, and uncertainty over the group’s future prospects and operations.
The Linklaters transaction team was led by partners Matthew Middleditch, Nathalie Hobbs, William Liu and Alex Bidlake, and counsel Iris Yeung, Taiki Ki and Christian Felton.
Linklaters corporate partner, Alexandra Bidlake told Asia Business Law Journal:
“Covid-19 has obviously had a significant impact on business across the board, and we have seen the aviation/travel and consumer/retail sectors hit particularly hard. We would expect to see further recapitalization and restructuring activity as companies seek to manage their balance sheets and liquidity.
“In the Hong Kong market, we are also seeing increasing numbers of take-privates with many controlling shareholders (either alone or together with funding partners) seeking to capitalize on lower prices – some with a view to relisting all of part of the business in Hong Kong or elsewhere in the future,” added Bidlake.