Hong Kong Airlines to face second hearing of US$6.2 billion debt restructuring in the UK after revenue slump and headcount cut
- The carrier will face a hearing next month on its US$6.2 billion debt restructuring in a British court, as it faces another hearing on a winding-up petition in Hong Kong
- Bondholders said that they gathered more than 40 per cent votes to vote down the proposal that they claimed unfair
Hong Kong Airlines will face a second hearing in a British court next month on its US$6.2 billion debt restructuring plan, as the carrier’s path back to profits was waylaid by the travel slump during the Covid-19 pandemic and a 65 per cent slash in headcount.
The crux of the dispute is the plan by Hong Kong Airlines to separate its creditors into three groups, comprising unsecured creditors, critical lessors, and holders of the perpetual bonds, according to documents seen by the South China Morning Post.
Under the proposal, the perpetual bondholders will receive an upfront payment equivalent to 2.5 per cent of the outstanding principal amount of the notes, a non-discretionary performance-linked distribution amount and later annual distributions “solely at the election of the issuer.” The airline also proposed a drastic haircut, slashing the principal amount of the notes from US$683 million to US$100 million.
In an October 25 hearing, the bondholders argued that the segregation placed them in an unfavourable position.
The recovery rate is too low, said one bondholder who declined to be named, saying that his firm will vote against the proposal while discussing with other bondholders to further negotiate with the airline.
