Following a mention in Hong Kong's High Court on Thursday, October 13, when Justice Jonathan Harris approved the holding of a Hong Kong Airlines (HX, Hong Kong International) creditor's meeting to vote on a restructuring plan, the airline has offered secured creditors an alternative to the proposed upfront cash payment put forward in a September 27 practice statement letter.
Per an October 13 supplemental practice statement letter viewed by ch-aviation, Hong Kong Airlines is now offering creditors a larger upfront cash payment. Under the original proposal, secured creditors would receive a pro-rata share of USD17,075,000, estimated to be around 2.5% of the total owed to secured creditors.
Under the revised proposal, creditors are offered an upfront cash payment of USD45,111,505, representing around 5% of the amount owed and accrued but unpaid distributions. While the airline says the original offer is fair, the revised offer is made to maximise the chances of creditors approving the restructuring plan.
Lawyers for the airline told Justice Harris that they need letters of support from 75% of creditors to pass their proposed restructuring plan that involves substantial debt writedowns and the return of aircraft. To date, around 73% of creditors have indicated their support for the restructuring plan. The airline says if more than 50% of creditors vote to accept the revised offer, then all secured creditors will receive the alternative offer. However, if 50% or less of creditors vote to accept, then the original USD17 million payment proposal stays.
"Perpetual noteholders (secured creditors) are now been offered two alternative consideration structures, with the option to elect which one they would collectively prefer," the supplemental practice statement letter. The new, alternative offer matches what the airline is offering unsecured creditors.
In its September practice statement letter, Hong Kong Airlines confirmed that it owed aircraft lessors HKD22.5 billion (USD2.87 billion), financial institutions HKD5.7 billion (USD730 million), and other creditors HKD6.8 billion (USD870 million). In addition, the airline wants to dispose of 19 aircraft, including eleven A330-200s, five A330-300s, and A350-900s. Further, Hong Kong Airlines is seeking HKD3 billion (USD380 million) in capital from backer HNA Aviation (Hong Kong) and other investors.
Citing complexities surrounding the restructuring, Hong Kong Airlines is yet to set a date for the creditor's meeting to approve the restructuring plan. The supplemental practice statement letter comes ahead of an October 25 UK High Court hearing, while in Hong Kong this week, Justice Harris said if the creditors rejected the restructuring plan, the parties must file fresh submissions before December 7 with December 12 set as the next hearing date there.
