The company’s announcement on Friday night comes a month after it bought back the remaining 50 per cent of preference shares, valued at HK$9.75 billion, it had issued as part of the same rescue package. The transaction for the warrants was expected to be concluded on the 10th business day after the date of the agreement.
“Our strong financial results for the first half of 2024 give us the confidence to buy back the warrants,” Cathay Group CEO Ronald Lam Siu-por said.
“As we close this chapter in our history, I would like to extend my sincere gratitude to the Hong Kong government and to all our shareholders for their invaluable support.”
He said Cathay’s recapitalisation in 2020 was essential to ensuring it sustained its operations amid an industry downturn caused by the global pandemic.
The warrants were part of a government-led HK$39 billion recapitalisation package for Cathay, as the airline struggled financially amid the collapse of the global travel market.
Under the newly announced agreement, Cathay said it would buy back at least HK$1,531,828,439 in warrants, subject to the share price movement in a certain period between the signing of the agreement and its completion.
Cathay said that the buy-back would “eliminate the possibility of dilution of Cathay shares” for its stakeholders. It added the airline would fund the buy-back with existing financial resources that would not impact its investment plans.
Under the bailout deal, the government invested HK$27.3 billion in the Cathay Group through the Land Fund, comprising preference shares with detachable warrants of HK$19.5 billion and a bridging loan of HK$7.8 billion.
As a sweetener, the government also received HK$1.95 billion in warrants that could be sold above the strike price of HK$4.68. The investment was expected to fetch returns of 4 per cent to 7.5 per cent for the government.
Friday’s announced buy-back of HK$1.53 billion in warrants, combined with the additional HK$2.44 billion in preference share dividends Cathay paid last month, was equal to the HK$4 billion that Financial Secretary Paul Chan Mo-po earlier said the government had gained through the investment.
The government said the bailout package was provided to Cathay to safeguard the city’s position as an international aviation hub in the face of the unexpected onslaught of Covid-19.
In March, Cathay reported a net profit of HK$9.78 billion for last year, its first since 2019, after a net loss of HK$6.62 billion in 2022.
The airline earlier delayed its original plan to return to 100 per cent passenger capacity from the end of 2024 to the first quarter of 2025.