Cathay Pacific shelves US dollar bond plans amid Hong Kong unrest

Cathay Pacific shelves US dollar bond plans amid Hong Kong unrest. (Reuters)
Updated 19 October 2019

Cathay Pacific shelves US dollar bond plans amid Hong Kong unrest

SINGAPORE: Cathay Pacific Airways has shelved plans for its first US dollar debt deal in 23 years, the airline said on Friday, after sources told Reuters that global investors had questioned the pricing due to civil unrest in Hong Kong.

The airline, the biggest corporate casualty of widespread anti-government protests in the Asian financial hub, on Friday lowered its second-half profit expectations, citing “incredibly challenging” conditions in its home market.

Cathay had started meeting investors in Hong Kong and Singapore on Sept. 24 after it mandated four banks to explore carrying out a US dollar denominated bond, according to a term sheet issued at the time, seen by Reuters.

It would have been the first US dollar debt deal for Cathay since 1996 and had been touted as a landmark transaction for the airline given all of its debt is denominated in Hong Kong dollars.

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

FASTFACT

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Cathay has only carried out 12 bond transactions in the past decade and all were priced in Hong Kong dollars.

However, investors demanded a higher price of at least 300 basis points over US Treasuries, which made the deal more expensive for Cathay, said the sources, who were not authorized to speak publicly about the matter. Cathay’s term sheet had said the transaction would be reliant on market conditions. A Cathay spokesman on Friday said the Hong Kong dollar private placement market was providing more funding opportunities and a debt issuance in that market was completed last month. “We will continue to monitor the US dollar bond market in future,” he said in a statement.

Dealogic data showed that Cathay raised $102 million in October and $64 million in May through Hong Kong dollar denominated deals.

The airline has only carried out 12 bond transactions in the past decade and all were priced in Hong Kong dollars.

Cathay had mandated Bank of America Merrill Lynch, BNP Paribas, Deutsche Bank and HSBC to work on the shelved US dollar bond deal. 


Oman’s sultan says government will work to reduce debt

Updated 23 February 2020

Oman’s sultan says government will work to reduce debt

DUBAI: Oman's Sultan Haitham bin Tariq al-Said said on Sunday the government would work to reduce public debt and restructure public institutions and companies to bolster the economy.
Haitham, in his second public speech since assuming power in January, said the government would create a national framework to tackle unemployment while addressing strained public finances.
"We will direct our financial resources in the best way that will guarantee reducing debt and increasing revenues," he said in the televised speech.
"We will also direct all government departments to adopt efficient governance that leads to a balanced, diversified and sustainable economy."
Rated junk by all three major credit rating agencies, Oman's debt to GDP ratio spiked to nearly 60% last year from around 15% in 2015, and could reach 70% by 2022, according to S&P Global Ratings.
The small oil producing country has relied heavily on debt to offset a widening deficit caused by lower crude prices. Also, the late Sultan Qaboos, who ruled Oman for nearly 50 years, held back on austerity measures.
The country has delayed introducing a 5% value added tax from 2019 to 2021, and economic diversification has been slow, with oil and gas accounting for over 70% of government revenues.
Last week, rating agency Fitch said Oman was budgeting for a higher deficit of 8.7% for 2020 despite its expectation of further asset-sale proceeds and some spending cuts.
"We are willing to take the necessary measures to restructure the state's administrative system and its legislation," Haitham said in his first speech since the mourning period for Qaboos ended, without elaborating.
He said there would be a full review of government companies to improve their business performance and competence.
Oman observers have said that if Haitham moves to decentralise power it would signal willingness to improve decision making. Like Qaboos, he holds the positions of finance minister and central bank chairman as well as premier, defence and foreign minister.