Here's some info I dug up while not enjoying my stay in Paris last year. Disclaimer, I take no responsibility for the accuracy/recency of any details, I don't know what the hell I'm talking about, I can barely speak English, I may edit this post at any time, without prior notice or consultation at my own discretion, and in accordance with my own policies that are either constantly changing or non-existent.
At time of writing in 2021, no dividend has been paid to shareholders since 2019. However last year CX announced a recapitalisation plan which resulted in just over $39B in new liquidity. This was raised in 3 ways. 1) the issue of 195 million Preferences shares at $100 each; 2) the issue of 2,503,355,631 (2.5 billion) Warrants at $4.68 each; and 3) a bridge loan of $7.8B @ 3.00%
The end result is the majority 3 shareholders maintain the same percentage shareholding, the government as a new shareholder via a company called Aviation 2020 Limited, receive guaranteed ROI, all other shareholders are diluted.
Here’s where it gets interesting, in the agreement, Preferential Shares issued will receive a Preference dividend rate of 3.00% per annum for the first 3 years, 5.00% per annum for the 4th year, 7.00% per annum for the 5th year, and 9% per annum for subsequent years. The dividend is payable semi-annually if in the opinion of the Directors, the amounts available to Cathay Pacific for distribution justify such payment. Any dividends not paid on the Preference Shares shall accumulate in arrears to be distributed at a later date.
On 16th Feb & again 12th Aug 2021 the Directors deferred dividend payment payable on the Preferential Shares.
The Preference shares are not redeemable however, at any time, CX may redeem all or some of the Preference Shares at an amount equal to the issue price of $100 per share plus any unpaid dividends.
Subsequent to the recapitalisation CX has issued the following bonds:
Round 1: Feb 2021 HKD$6.740 billion @ 2.75% maturing 2026
Round 2: May 2021 USD$650 million (HKD$5.057 billion) @ 4.875% maturing 2026
Round 3: Aug 2021 USD$2.5 billion (HKD$19.450 billion) still under offer rate not known at time of writing.
Here’s a calculation of the dividend owed on the Preference Shares, whether or not it is paid on schedule or deferred until a later date, until CX redeems them: Years 2021 to 2023 $585 million per year; Year 2024 $975 million; Year 2025 $1.365 billion; Year 2026 onwards $1.755 billion per year. And the annual interest on the bond issuance: Round 1 $185.35 million; Round 2 $246.53 million; Round 3 $948.19 million (assuming same rate as Round 2)
The 2021 interest owed in the form of special dividends amounts to $585 million, plus bridge loan interest $234 million, total $819 million
The 2022 special dividends owed amounts to $585 million, plus 2021 deferred special dividends $585 million, plus bridge loan interest, plus Round 1 - 3 bond interest. This would add up to over $2.8 billion, far more than most years annual profit. I suspect that the recent bonds issued are in fact going to be used to redeem the Preferential shares and or repay the bridge loan since the overall finance cost would be lower but this is only my thoughts. If I’m incorrect and they plan on holding all this additional debt then CX is now a zombie company and can only exist in an environment of further suppressed interest rates and government backing.
Here’s the reported annual Profit / (Loss) going back to 2011.
2011 $5.501 billion
2012 $862 million
2013 $2.620 billion
2014 $3.15 billion
2015 $6.000 billion
2016 ($575) million
2017 ($1.259) billion
2018 $2.345 billion
2019 $1.691 billion
2020 ($21,648) billion
2021 interim ($7,565) billion