Hong Kong Airlines (HX, Hong Kong International) has told investors in a USD683 million perpetual bond that it will defer USD24.33 million in semi-annual interest payments due on July 26, raising doubts about repayment of mounting debts, the South China Morning Post reported on July 10.
Hong Kong Airlines financing unit Blue Skyview Company issued the notes in 2017. The deferral raises doubts about the carrier’s ability to pay its mounting debts while the coronavirus continues to ground most of its fleet. The deferral means that it will have to bear a higher interest rate, from 7.125% to 12.125%, according to the report.
Asked for comment, Hong Kong Airlines simply responded to the newspaper: “As a private company, we do not comment on our financial activities publicly.”
The bond’s first call date is also on July 26, but Hong Kong Airlines has yet to clarify that it will exercise the option to redeem the notes.
The company failed to submit its 2019 financial report to bondholders by the end of May, as required in its prospectus, the penalty for which was also a 5% rise in the interest rate. This meant that the coupon increase was unavoidable, so the airline opted to defer the interest payment, creditors explained to the newspaper.
It has, however, submitted the 2019 report to Hong Kong's Air Transport Licensing Authority, the statutory body confirmed. Doing so is essential for carriers to maintain their licences.
In the meantime, Hong Kong Airlines continues its search for a white-knight investor, with Air China (CA, Beijing Capital) and Jiangsu-based Wuxi Communications Industry Group both reported to have held talks about a potential acquisition.
