Cathay Pacific to Test Investor Demand With Rare Dollar Bond

(Bloomberg) -- Cathay Pacific Airways Ltd. is looking to sell a rare U.S. dollar bond as Hong Kong’s protests weigh on the company’s outlook.

The city’s biggest carrier will have a roadshow in Hong Kong Wednesday after starting off in Singapore on Tuesday. The potential bond offering is expected to be unrated. The deal size and coupon haven’t been made public.

Cathay Pacific shares have tumbled 29% since this year’s peak in April, while the airline’s chief executive officer and chairman announced their resignations after China’s civil aviation authority began clamping down on the company because of employees joining the protests. The airline reported its biggest drop in passenger traffic in more than a decade in August.

“It will be meaningful for Hong Kong if Cathay can print as investors are quite negative on the company given the headlines,” said Wonnie Chu, managing director of fixed income at GaoTeng Global Asset Management Ltd., highlighting that the airline needs to offer a premium.

The sale will be an important test of investor appetite and the impact of the protests on the asset class as a whole, added Thomas Wu, head of Asia fixed income at Pictet Wealth Management. “Cathay may be tapping the bond market instead of relying on usual bank lines as banks look to reduce their exposure to tourism related names and this could provide opportunities” as other Hong Kong companies come to the public bond market instead, Wu said.

Dollar-denominated bond issuance from Hong Kong borrowers jumped toward a six-year high in the third quarter. Cathay Pacific had sold floating-rate dollar bonds in 1994, according to Bloomberg data.

Tourists arrivals in the city fell almost 40% in August from a year earlier, according to a senior government official.

--With assistance from Adrian Yim and Will Davies.

To contact the reporter on this story: Rebecca Choong Wilkins in Hong Kong at rchoongwilki@bloomberg.net

To contact the editors responsible for this story: Neha D'silva at ndsilva1@bloomberg.net, Richard Frost

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