Swire Pacific trimmed its Cathay Pacific stake by 5.96 percentage points to 39.15 percent through a HK$4.79 billion accelerated placement of 362 million shares at a 7.7 percent discount. The airline's stock dropped 3.63 percent to HK$13.53 on heavy volume of HK$4.828 billion.
The conglomerate sold 362 million Cathay Pacific shares at HK$13.20 apiece — a 7.7 percent markdown from Tuesday's close of HK$14.30 — in an accelerated exchange trade that trimmed its holding to 39.15 percent.
Swire Pacific said in a statement it remains confident in and committed to Cathay Pacific, with no intention to propose material changes to the airline's governance or management arrangements.
The placement generated gross proceeds of HK$4.79 billion. The accelerated exchange trade also involved repurchasing HK$4.689 billion in aggregate principal of zero-coupon exchangeable bonds issued in June, at 109.08 percent of principal — about 99.77 percent of the total outstanding. Roughly HK$11 million in bond principal remains.
Cathay Pacific shares fell 3.63 percent to HK$13.53 on Wednesday, with 366 million shares worth HK$4.828 billion changing hands. The placement adds supply pressure as Swire's stake drops 5.96 percentage points to 2.381 billion shares.
Swire expects a gain of about HK$1.12 billion from the share placement, with an overall net gain of approximately HK$704 million from the accelerated exchange trade after accounting for the fair value loss on bond repurchases.
The transaction stems from HK$4.7 billion in zero-coupon exchangeable bonds Swire issued in June, linked to Cathay Pacific shares. The group collected indications of interest from bondholders a day before executing the accelerated exchange trade before market open on Wednesday.
Swire Pacific A shares fell 1.6 percent, while B shares declined 1.2 percent. Cathay Pacific opened 1.71 percent lower and touched a session trough of HK$13.42 before paring losses.
The placement reduces Swire's Cathay holding to 2.381 billion shares, still a controlling stake. The group said the accelerated exchange trade provides certainty on the bond conversion outcome and strengthens its balance sheet without reducing its Cathay stake beyond the level contemplated under the original bond terms.
The discount placement shows Swire's intent to monetize part of its Cathay holding while retaining strategic control, and the influx of 362 million shares may continue to weigh on Cathay Pacific's share price in the near term. Investors will watch whether Swire Pacific Finance exercises its right to redeem the remaining HK$11 million in bonds at principal, given repurchases have exceeded 90 percent of the original issuance.
This article is for informational purposes only and does not constitute investment advice.
