HONG KONG -- Cathay Pacific Airways raised $650 million from its first U.S. dollar-denominated bond sale in almost three decades, as the Hong Kong flag carrier shores up its finances.
The airline, which posted a record $2.8 billion loss last year because of the coronavirus pandemic, sold 5.25-year senior unsecured notes at a 4.875% coupon compared with initial guidance of 5.2%, according to a term sheet. The offering attracted bids worth about $1.5 billion, two people familiar with the transactions said.
"The appetite was strong enough for us to narrow the coupon and had a good mix of investors," one of the people said.
Cathay, which received a government-led $5 billion equity and cash bailout last year, plans to use the bond sale to enhance working capital and for general corporate purposes, according to a term sheet.
The Hong Kong carrier, unlike global peers, lacks a domestic network. The pandemic has devastated Cathay's services, which span 180 destinations worldwide. Mainstay passenger revenue dropped 84% last year, forcing Cathay into cash preservation mode to survive what Chairman Patrick Healy in March called "the most challenging 12 months of [the company's] more than 70-year history."
Cathay cut 8,500 jobs in October -- 24% of its total head count at the time -- to cope with the grounding of most of the airline's passenger flights amid the pandemic. Hong Kong-based employees accounted for 5,300 of those job losses.
Impairment and related charges totaled 4.06 billion Hong Kong dollars ($523 million at current rates) last year, mainly from discharging 34 aircraft. The airline said 92 of its aircraft, or 44% of its passenger fleet, were parked overseas in Australia and Spain.
The U.S. dollar bond issuance is the airline's first since 1996, as the company has relied primarily on debt issued in Hong Kong dollars.
Citigroup, HSBC, SMBC Nikko and Bank of China's Hong Kong unit were joint lead managers and bookrunners on the deal.
Cathay said in February it completed the issuance of a 2.75% convertible bond, raising HK$6.74 billion in new funds. Healy had said the company was looking for additional "commercial opportunities for raising further liquidity over the coming weeks and months." The convertible bonds traded Monday with a yield of 1.51%, according to Refinitiv data.
Rival Singapore Airlines raised $500 million in its first U.S. dollar-denominated bond issue in January. The heavily oversubscribed July 2026 notes carry an annual coupon of 3%. The bonds were trading at $101.80 with a yield of 2.61%.
Cathay shares rose 1.8% on Monday to close at HK$6.63. The shares have dropped 7.5% so far this year compared with a 5% gain for the Hang Seng Index.