Hong Kong Airlines bondholder group to oppose debt restructuring

Some bondholders of Hong Kong Airlines are seeking to block a $6.2b 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 on Tuesday to deal with its unsecured creditors, including some lenders, lessors of aircraft and $683m 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 on Tuesday 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” favorable treatment given to the firm’s owner and its affiliates. Creditors will vote on the restructuring plan ahead of a sanction hearing scheduled in December. The bondholder group is also opposing the company’s proposal to bundle the vote of secured and unsecured creditors together. <br/>