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Some bondholders of Hong Kong Airlines are seeking to block a $6.2 billion debt restructuring plan, which they say treats them unfavorably compared with the company’s owner and its affiliates.
The ad-hoc group, representing some holders of perpetual notes and advised by law firm Allen & Overy, will vote down a proposal to reduce the debt of the embattled carrier by 74%, according to court documents.
Hong Kong Airlines began a debt restructuring process in Hong Kong earlier this month. It opened a parallel procedure in the UK to deal with its unsecured creditors, including some lenders, lessors of aircraft and $683 million of bondholders. As part of the restructuring plan, unsecured creditors would get paid in cash an amount equivalent to about 5% of the money owed to them.
The group’s lawyers told judge Timothy Fancourt that it can prevent the company from reaching the required 75% support to go ahead with the deal.
The group said it expects Hong Kong Airlines to then apply for a so-called cross-class cram down, which would effectively allow it to proceed despite their opposition. The bondholders say that the carrier wouldn’t meet the criteria to apply for such a process because of “unfair†favourable treatment given to the firm’s owner and its affiliates.
Debt-ridden Hong Kong Airlines is currently the smallest of three carriers operating in the Asian hub. The company’s financial crisis predates the pandemic which curbed international travel worldwide.
—Bloomberg