Linklaters, Clifford Chance Advise on $5.3B Cathay Pacific Bailout in Hong Kong
The city's flagship carrier will receive a lifeline from the government as well as its major shareholders amid the aviation sector's worst financial crisis in recent memory.
June 10, 2020 at 10:34 AM
4 minute read
Linklaters and Clifford Chance are advising on Cathay Pacific Airways Ltd.'s $5.3 billion (HK$41 billion) government bailout following a near collapse of Hong Kong's aviation industry in the midst of the coronavirus pandemic and yearlong political unrest.
The rescue package consists of two tranches from the government and one tranche from Cathay's large shareholders. As part of the program, the Hong Kong government will buy HK$19.5 billion ($2.5 billion) worth of preferential shares, and warrants to buy an additional HK$1.95 billion worth of shares later. In addition to the share purchase, the government will also offer a HK$7.8 billion bridge loan to the airline.
Meanwhile, Cathay will issue HK$11.7 billion worth of new shares to its major shareholders, including Swire Pacific, a Hong Kong-based conglomerate, Air China, and Qatar Airways. Swire will remain Cathay's largest shareholder with a 42% holding following the new rights issue, and the government will hold around 6%.
Linklaters is advising Cathay with a team led by global corporate head Matthew Middleditch in London, and banking partner and Asia managing partner Nathalie Hobbs, capital markets partner and China head William Liu and corporate partner Alexandra Bidlake in Hong Kong.
Cathay Pacific hired former Davis Polk & Wardwell partner Paul Chow as group general counsel in July 2019. Chow had been a partner with Linklaters before moving to Davis Polk in 2011.
Clifford Chance is representing the Hong Kong government with a Hong Kong-based team led by corporate partner Amy Lo, finance partner Anthony Wang, debt capital markets partner Matt Fairclough and corporate partner Virginia Lee, with support from asset finance partner Paul Greenwell.
Allen & Overy is advising Morgan Stanley, alongside BOC International , HSBC and BNP Paribas, as underwriters of the HK$11.7 billion share issue. Hong Kong partner Lina Lee leads the team with corporate partner Jonathan Hsui; they are supported by capital markets partners Agnes Tsang and Jaclyn Yeap, U.S. securities partners Alex Stathopoulos and Kung-Wei Liu, and regulatory partner Charlotte Robins.*
Slaughter and May is advising Swire Pacific on the deal. Hong Kong partners Peter Brien, Lisa Chung and Jing Chen lead the team. The Magic Circle firm has been a longtime adviser to Cathay. Last year, it represented the airline on a $630 million acquisition of Hong Kong Express Airways, the city's budget carrier. ^
DLA Piper is representing Air China, one of Cathay's main shareholders, with a team led by Beijing partner Vivian Liu, and with help from Singapore partner Philip Lee.*
The Hong Kong flagship carrier has experienced severe financial loss during the coronavirus pandemic and its resulting travel bans in Hong Kong and across the globe. The government has imposed a travel ban on mainland China since February, and businesses between Hong Kong and China contributed to a large portion of Cathay's revenue. In June, the government extended travel restrictions for Greater China until at least early July and for the rest of the world until mid-September. Nonresidents continue to be banned from entering indefinitely.
Cathay's problems began before COVID-19. Last year, the company got involved in a series of controversies as anti-government protesters took the demonstrations to the airport. The Hong Kong carrier also got in trouble with the Chinese civil aviation regulator after crew members participated in the protests.
*Updated June 11: This story has been updated with Allen & Overy's role in advising underwriters in the rights issue and DLA Piper's role in representing Air China.
^Updated June 16: This story has been updated with Slaughter and May's role in advising Swire Pacific on the deal.
|Related Stories:
Davis Polk Hong Kong Partner Moves In-House to Flagship Airline Cathay Pacific
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