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Cathay Pacific Prepares U.S. Dollar Bond Plans Amid Hong Kong Protests

Cathay Pacific Airways prepared plans for its first U.S. dollar debt deal in 23 years, the airline said on Friday…

By Luann Reagan , in Industry News News , at October 20, 2019 9:16 AM EDT Tags: , ,

Cathay Pacific Airways prepared plans for its first U.S. dollar debt deal in 23 years, the airline said on Friday after sources said that world investors had balked at the pricing due to civil disturbance in Hong Kong.

The airline, the most prominent company casualty of widespread anti-government protests in the Asian financial hub, on Friday, lowered its second-half profit expectations, citing “extremely challenging” situations in its home market.

Cathay had begun meeting traders in Hong Kong and Singapore on Sept. 24 after it mandated four banks to explore carrying out a U.S. greenback-denominated bond, according to a term sheet issued at the time.

It would have been the first U.S. greenback debt offer for Cathay since 1996 and had been promoted as a landmark deal for the airline given all of its debt is denominated in Hong Kong dollars.

The issuance was to be unrated, and two sources with information on the matter said that Cathay was prepared to pay 200 basis points over the U.S. Treasuries rate to secure three-year or five-year funding, with the size and term of the placement dependent on demand.

Nevertheless, traders demanded a higher price of a minimum of 300 basis points over U.S. Treasuries, which made the agreement costlier for Cathay, stated the sources, who weren’t allowed to talk publicly about the matter.

Cathay’s term sheet had stated the transaction would be reliant on market conditions.

A Cathay spokesperson on Friday said the Hong Kong greenback private placement market was offering more funding opportunities, and debt issuance in that market was executed in September.