How the Cathay Pacific bailout landed Clara Chan the CEO's job at Hong Kong wealth fund

Clara Chan Ka-chai earned the monikers "goddess" and "little chilli" for deftly negotiating Cathay Pacific Airways' HK$39 billion (US$5.2 billion) rescue plan in 2020, which catapulted her into the CEO's chair at the Hong Kong Investment Corporation (HKIC).

Chan's handling of the Hong Kong flag carrier's bailout within three months of the Covid-19 pandemic proved her mettle, which led her to be considered for the top job at the government-run HK$62 billion wealth fund last October, according to two sources familiar with the hiring process.

Back then, Chan was an executive director at the Hong Kong Monetary Authority, overseeing the HK$4 trillion Exchange Fund's investments that included the Land Fund used to finance Cathay's rescue.

Do you have questions about the biggest topics and trends from around the world? Get the answers with SCMP Knowledge, our new platform of curated content with explainers, FAQs, analyses and infographics brought to you by our award-winning team.

"The negotiation of Cathay Pacific's rescue plan was hard, as it had to be done within a short period of time," Chan said in her first media interview after taking over at HKIC nearly eight months ago.

The Hong Kong government took part in Cathay Pacific's HK$39 billion (US$5.2 billion) rescue plan in 2020. Photo: Eugene Lee alt=The Hong Kong government took part in Cathay Pacific's HK$39 billion (US$5.2 billion) rescue plan in 2020. Photo: Eugene Lee>

The terms and conditions of the bailout had to be tough, she said, noting that a balance had to be struck between the funding needs of the carrier and decent returns on taxpayers' money.

Cathay was on the brink of collapse as the pandemic brought international traffic to a standstill. Chan represented the government and led the negotiations with other shareholders from March to June before reaching an agreement.

Her role in the bailout earned her the nickname "goddess" from some Cathay executives, but that was not the only sobriquet.

"Some people called me 'little chilli', as they considered the terms of the rescue package to be very tough," she said.

"But it had to be tough. We finally put together a rescue plan for Cathay that was also an investment for the government."

The package that was finally agreed upon was a HK$11.7 billion rights issue, with the government extending a HK$7.8 billion bridging loan to Cathay Pacific and subscribing to HK$19.5 billion worth of preference shares.

As a sweetener, the government also got HK$1.95 billion in warrants that could be sold above the strike price of HK$4.68. The investment was expected to fetch returns of 4 per cent to 7.5 per cent for the government.

Chan said she has benefited greatly from the Cathay experience and was putting it to good use at HKIC.

"Any deals that are made by the HKIC, we are making sure we are not giving taxpayers' money as grants," she said. "We will nurture start-ups financially and at the same time make sure the investments bring returns to the government and avoid downside risks."

This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP's Facebook and Twitter pages. Copyright © 2024 South China Morning Post Publishers Ltd. All rights reserved.

Copyright (c) 2024. South China Morning Post Publishers Ltd. All rights reserved.