Key facts
- Swire Pacific is issuing HK$4.7 billion (approx. $600 million) in one-year convertible bonds.
- The bonds are exchangeable for shares in its subsidiary, Cathay Pacific Airways.
- Full exercise of the bonds would reduce Swire's stake in Cathay Pacific by 5.9% to 39.2%.
- The initial exchange price is HK$13.18 per share, a 2.9% premium.
- Funds raised will be used for general working capital.
Hong Kong conglomerate Swire Pacific announced it will raise approximately HK$4.7 billion (about $600 million) through the issuance of one-year convertible bonds. These bonds are exchangeable for shares in its subsidiary, Cathay Pacific Airways.
If the bonds are fully exercised by investors, Swire Pacific's stake in Cathay Pacific would decrease by 5.9%, moving from its current 45.1% holding to 39.2%. Despite this potential reduction, Swire would remain the largest single shareholder in the airline.
The zero-coupon bonds carry an initial exchange price of HK$13.18 per Cathay Pacific share, which represents a 2.9% premium over the airline's closing price of HK$12.81 on Tuesday. Investors will be able to exercise their exchange rights starting 41 days after the bonds are issued.
Swire Pacific stated that the proceeds from the bond issuance will be utilized for general working capital. The company believes this move will enhance liquidity, strengthen its balance sheet, and improve financial flexibility, all while maintaining a significant long-term strategic interest in Cathay Pacific. Swire Pacific also clarified that it has no current plans to propose any substantial changes to Cathay Pacific's governance or management structure.
This issuance follows a previous transaction in March, where Swire Pacific sold a 2.52% stake in Cathay Pacific for approximately HK$1.8 billion. This sale occurred after Swire's shareholding in the airline had passively increased due to a share buyback initiated by Cathay Pacific from another major shareholder.