Cathay Pacific Sells Greenback Bonds as Covid-19 Saps Demand for Air Journey

Cathay Pacific Airways Ltd.

CPCAY 1.65%

bought its first greenback bonds in additional than twenty years, seizing on debt traders’ willingness to fund pandemic-ravaged airways because the business’s prospects enhance.

Hong Kong’s flagship provider bought a $650 million bond due in 2026, based on a time period sheet issued late Monday that was seen by The Wall Road Journal. The bond was issued with a yield of 4.875%, decrease than preliminary steerage of 5.2%, pointing to strong demand.

Final June, Cathay Pacific obtained a roughly $5 billion bailout from the Hong Kong authorities and different traders, together with high shareholders

Swire Pacific Ltd.

,

Air China Ltd.

and Qatar Airways Co. The airline obtained bridge loans and issued new shares and choice shares as a part of the funding package deal.

That fundraising was adopted by restructuring that lower 1000’s of jobs and shut a subsidiary airline, and a sale of convertible bonds in January that raised 6.74 billion Hong Kong {dollars}, the equal of $868 million.

Cathay swung to a web lack of HK$21.65 billion in 2020. Analysts on common count on its loss to slender to about HK$8.5 billion in 2021, based on estimates compiled by FactSet, and for it to return to profitability subsequent 12 months.

Buyers have been extra prepared to purchase debt bought by airways in current months. They’ve drawn reassurance from authorities help for a lot of carriers, and are betting that increased inoculation charges in opposition to Covid-19 will drive a rebound in journey, first on home routes in massive markets just like the U.S., and finally internationally. Not like many carriers, Cathay doesn’t have home flights.

Airways have bought about $14 billion in bonds globally to this point this 12 months, up greater than 50% the quantity bought a 12 months earlier, based on Dealogic.

American Airways Group Inc.

raised $10 billion through bonds and loans in March, whereas Cathay’s regional rival

Singapore Airways Ltd.

in January issued $500 million in bonds due 2026.

“With the outlook for worldwide journey extremely unsure, traders have proven a willingness to put money into airways with intensive home enterprise and/or sturdy authorities help,” mentioned Mark Reade, head of fixed-income analysis for Mizuho Securities Asia.

Some bond traders stay skeptical concerning the outlook for the business. Dhiraj Bajaj, a bond fund supervisor for Asia at Lombard Odier, mentioned it’s troublesome to foretell a turning level for aviation and journey bonds, given the Covid-19 variants rising in India and elsewhere.

Cathay’s most up-to-date visitors figures, for March, confirmed passenger visitors fell 94% in contrast with the identical interval final 12 months. Hong Kong’s quarantine regime, which requires most vacationers to quarantine in a lodge for 21 days, is without doubt one of the world’s strictest and has crimped air journey to town.

Cathay beforehand shelved plans to promote greenback bonds in October 2019. The airline was then fighting steep declines in passenger numbers throughout antigovernment protests, and drew criticism from Chinese language authorities after some staff took half in demonstrations.

As of Monday, the provider’s Hong Kong-listed shares had dropped 7.5% to this point this 12 months, underperforming the benchmark Cling Seng Index, based on FactSet.

Write to Frances Yoon at frances.yoon@wsj.com

Copyright ©2020 Dow Jones & Firm, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8

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