Cathay Pacific Soars: Bond Repurchase Boosts Shares Over 14%

Cathay Pacific Airways Limited (CPCAY) shares surged over 14% on Wednesday, November 14, following the announcement of its plans to repurchase secured convertible bonds due in 2026. The airline's strategic move to reduce debt and improve its financial health has been well-received by investors, driving the stock price up to HK$12.20 per share.

Cathay Pacific's bond repurchase, totaling HK$6.73 billion (US$866 million), represents approximately 90.3% of the original issuance. The bonds, with a 2.75% annual coupon, were issued by Cathay Pacific Finance III Limited. The repurchase, which is subject to certain conditions, aims to strengthen the airline's balance sheet and reduce interest expenses.

The bond repurchase is part of Cathay Pacific's ongoing efforts to optimize its capital structure and position itself for future growth. By reducing debt, the airline improves its financial flexibility and enhances its ability to navigate challenges and opportunities in the competitive aviation industry.

The repurchase of these bonds is expected to have a positive impact on Cathay Pacific's future earnings and cash flow. By reducing interest expenses, the airline can allocate more resources to growth initiatives and sustainability projects. This move also signals management's confidence in the company's long-term business prospects and commitment to maximizing shareholder value.

Cathay Pacific's financial health has been improving in recent years. In the first half of 2024, the airline reported an attributable profit of HK$3.6 billion, compared to a profit of HK$4.3 billion in the same period last year. The reduction in profit is primarily attributable to the normalization of ticket prices. Meanwhile, the airline's airlines and subsidiaries, excluding exceptional items, reported an attributable profit of HK$3.8 billion, compared to a profit of HK$4.8 billion in the first half of 2023.



Cathay Pacific's bond repurchase aligns with its long-term strategic goals and growth plans. The airline has been investing in fleet modernization, cabin products, lounges, and digital and sustainability leadership. Cathay Pacific's commitment to strengthening Hong Kong's international aviation hub status is evident in its substantial investments, totaling over HK$100 billion over the next seven years.

In conclusion, Cathay Pacific's bond repurchase has been well-received by investors, driving the stock price up over 14%. The strategic move to reduce debt and improve financial health is expected to have a positive impact on the airline's future earnings and cash flow. Cathay Pacific's commitment to growth and sustainability, along with its strong financial performance, positions the airline well for future success.