The government in Hong Kong has announced a HK$30 billion bailout package for the struggling carrier Cathay Pacific in the form of loan and an undisclosed stake, the media reported.
This marks the first time the government of Hong Kong has invested in a private company.
The bailout package will help Cathay Pacific weather the coronavirus pandemic.
Reportedly, Cathay Pacific will issue new shares as a part of the deal and it will also see government authorities taking up two seats at its boardroom.
In a statement, the carrier said, “Cathay Pacific has explored available options and believes that a recapitalisation is required to ensure it has sufficient liquidity to weather this current crisis.”
Cathay Pacific is still majorly owned by Swire Group with a 45 percent stake followed by Air China with 29.99 percent. Qatar Airways also owns a 10 percent stake in the carrier. Reportedly, the government will acquire a 6 percent stake in the company.
The introduction of the new bailout package will see the carrier go throw a restructuring.
The carrier said in a stock exchange filing that the restructuring includes the use of “preference shares” worth HK$19.5 billion; warrants to subscribe for shares worth HK$1.95 billion; a rights issue worth HK$11.7 billion; and a bridge loan worth HK$7.8 billion.
Independent aviation analyst Brendan Sobie told the media, “Hong Kong needs to protect its position as a hub given all the investment in expanding Hong Kong International Airport and the competitive landscape following Singapore’s big move over two months ago.”