ClOSedloop22
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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
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 ($7,565) billion
Revenue was down before the woo flu hit CX. The small matter of protests hardly made HK the dream spot for a long weekend. Or any other stay for that matter. Combine that with a draconian security law, punitive and nonsensical quarantine requirements ( which will take an age to unwind now that the infrastructure is in place and the bureaucrats have got a taste for it) and a brain and talent brain and the place is well and truly f@@ked. Talk about killing the goose that laid the golden egg.
The 3rd runway will just become another vanity project, ( they’re scattered all over the planet from Zaragoza, Bangkok to Beijing ) Shenzhen will subsume HKG anyway, and quite frankly who needs 4 airports in the Pearl River Estuary when one would suffice.
Oh for the days when the only worry we had post flight was not cocking up the e tech log, which gate we were on, and which bus we were going to catch. !
The 3rd runway will just become another vanity project, ( they’re scattered all over the planet from Zaragoza, Bangkok to Beijing ) Shenzhen will subsume HKG anyway, and quite frankly who needs 4 airports in the Pearl River Estuary when one would suffice.
Oh for the days when the only worry we had post flight was not cocking up the e tech log, which gate we were on, and which bus we were going to catch. !
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Interesting work, happyguy.
What are your thoughts on assets? You concentrate on profit and cash flow in your analysis, but in 2020 Cathay had assets of 26 Billion (!) US$. There are multiple ways to repay debt. I don't know the underlying debt associated to those assets, but the price to book ratio is currently at a comfortable 0.64 and there has been about 2 billion in liquidity reserves just before Covid hit. A label as "zombie company" hence appears a bit drastic in my opinion.
Globo, yes there was a slight reduction of revenue caused by the protests, but you have to keep that into perspective. The revenue in 2018 was 14.238 Billion, in 2019 it was 13.714 Billion. The gross profit was actually higher in
2019 than in 2018, at 2.814 Billion compared to 2.751 Billion. Additionally, If there is one thing we can agree on it probably would be to acknowledge that the political protests are history and done. They won't be a problem anymore in the future.
What are your thoughts on assets? You concentrate on profit and cash flow in your analysis, but in 2020 Cathay had assets of 26 Billion (!) US$. There are multiple ways to repay debt. I don't know the underlying debt associated to those assets, but the price to book ratio is currently at a comfortable 0.64 and there has been about 2 billion in liquidity reserves just before Covid hit. A label as "zombie company" hence appears a bit drastic in my opinion.
Globo, yes there was a slight reduction of revenue caused by the protests, but you have to keep that into perspective. The revenue in 2018 was 14.238 Billion, in 2019 it was 13.714 Billion. The gross profit was actually higher in
2019 than in 2018, at 2.814 Billion compared to 2.751 Billion. Additionally, If there is one thing we can agree on it probably would be to acknowledge that the political protests are history and done. They won't be a problem anymore in the future.
Last edited by Sam Ting Wong; 12th Feb 2022 at 12:26.
What are your thoughts about assets? You concentrate on profit and cash flow in your analysis, but in 2020 Cathay had assets of 26 Billion (!) US$. There are more ways to repay debt, plus the price to book ratio is currently at a comfortable 0.64. A label as zombie company is a bit drastic in light of the actual
balance sheet in my opinion.
balance sheet in my opinion.
Swire have financially engineered equity with the expectation of a return to profit by 2021. The deferred dividend payments illustrate this.
The Swire logo that adorns the tails of all their aircraft is being painted red and there isn’t any yellow stars appearing.
Globo, yes there was a slight reduction of revenue caused by the protests, but you have to keep that into perspective. The revenue in 2018 was 14.238 Billion, in 2019 it was 13.714 Billion. The gross profit was actually higher in
2019 than in 2018, at 2.814 Billion compared to 2.751 Billion
2019 than in 2018, at 2.814 Billion compared to 2.751 Billion
CX were forced to do this as their competitors seized the opportunity from the disastrous fuel hedge. All those old fuel hungy B744’s became useful, but CX were forced to retire to seek fuel savings, lowering their ROCE.
This slow motion train wreck has been in motion for the past 5 years.
Last edited by KABOY; 12th Feb 2022 at 12:19.
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There are two ways to look at the fuel hedge disaster
First, to state the obvious. It was a major strategic error.
Second, much more interesting in my opinion, the company could absorb it. Many companies with weaker balance sheets would have collapsed.
First, to state the obvious. It was a major strategic error.
Second, much more interesting in my opinion, the company could absorb it. Many companies with weaker balance sheets would have collapsed.
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Ah yes, how can we all forget that fuel hedging was actually a good thing 
Listen here to Ivan Clueless:
https://www.bloomberg.com/news/video...dging-strategy
Listen here to Ivan Clueless:
https://www.bloomberg.com/news/video...dging-strategy
Last edited by Cury Lamb; 12th Feb 2022 at 18:48.
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Ah yes, the famous A50 speech.
A most motivating and inspiring interview that instilled confidence.....
Which is why he was kicked upstairs
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F knows what the HK gov (CCP) wants for CX, but if they want to get rid of them to make way for GBA or whatever other rumours there are going around, then it makes no sense to bail them out.
Go on Google Earth and check the HKIA development. Someday in the not so far future this place will be one the biggest airports in the world. Cathay will be the major airline operating out of HKIA, and the China market will grow faster than any other global market. Additionally, Cathay will have a much lower cost base than before the pandemic. I say Cathay will be highly profitable. And if that sounds unbelievable, I have one more for you. Hong Kong will become one of the wealthiest and most prosperous cities in the world, if not THE richest city in the world. No other city is better placed to profit from the Asian century.
What will be the cost on introducing Omicron to Hong Kong? If this gets traction, CX will become a state owned carrier without Air China having to put a dollar in.
https://tickernews.co/cathay-pacific...nt-of-justice/
Last edited by KABOY; 14th Feb 2022 at 09:48.
Seems like the HKSAR is starting to recoup their investment without divesting their interest. Better to suck it out whilst still solvent right?
What will be the cost on introducing Omicron to Hong Kong? If this gets traction, CX will become a state owned carrier without Air China having to put a dollar in.
https://tickernews.co/cathay-pacific...nt-of-justice/
What will be the cost on introducing Omicron to Hong Kong? If this gets traction, CX will become a state owned carrier without Air China having to put a dollar in.
https://tickernews.co/cathay-pacific...nt-of-justice/
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BFD. Another doomed white elephant, as is the bridge, which should at the very least have been built with dual rail and road access. That’s if there’s any actual need for it in the first place.
“ close to travel hub “. Travel to where. ?
CX will try to target that market, but they need to gain approval for all the KA routes they jettisoned. There is no doubt they will gain the approval eventually….
CX will become a regional player, the mainland doesn’t want a colonial business being a Chinese city flag carrier.
