Hong Kong government appoints former watchdog head, ex-justice minister as its representatives on Cathay Pacific board, overseeing bailout package
- Appointment of Carlson Tong and Rimsky Yuen approved this week, with the former resigning as Airport Authority director
- News follows recent announcement for roles on carrier’s board as administration’s ‘eyes and ears’
Former securities watchdog chief Carlson Tong Ka-shing and ex-justice minister Rimsky Yuen Kwok-keung have been appointed as the Hong Kong government’s two representatives on Cathay Pacific Group’s board to oversee the airline’s HK$27.3 billion bailout.
“They are suitable candidates to serve as observers on the Cathay group’s board. I am confident they will help safeguard the government’s investment interests,” Financial Secretary Paul Chan Mo-po said on Tuesday.
01:29
Hong Kong government to bail out Cathay Pacific with HK$30 billion in loans and direct stake
For the first time, the government will have a direct interest in the affairs of Hong Kong’s flag carrier, a move not uncommon in the industry. The likes of Singapore Airlines and Franco-Dutch carrier Air France-KLM, whose governments have a financial stake in their businesses, have also received bailouts after the coronavirus triggered a collapse in air travel.
Tong, chairman of the Securities and Futures Commission from 2012 to 2018 and a 30-year veteran with KPMG, is no stranger to aviation. He was an Airport Authority Hong Kong board member, but has since resigned upon taking up the observer role. He will be familiar with Cathay as KPMG has been its long-standing auditor, including during his tenure at the accountancy firm.
He told the Post he was “honoured” to be appointed.
“My understanding of my role is to facilitate effective communication between Cathay and the government and to protect [the] government’s investment in the company. I look forward to working closely with the board and the management team of Cathay Pacific for the best interests of both parties,” he said.
He added that his role on the board of the Airport Authority Hong Kong had deepened his understanding of the city’s value as an international aviation hub.
“I believe this experience will contribute to the effectiveness of my new role,” he said.
Yuen, a lawyer, was formerly the top justice official in the administration of chief executive Leung Chun-ying, a role he maintained for several months under current leader Carrie Lam Cheng Yuet-ngor.
“I am honoured by the [Cathay] appointment and will endeavour to fulfil my role as much as possible,” Yuen told the Post.
The government’s decision to help the airline was not just a commercial or financial investment, he said, citing Article 128 of the Basic Law, which states that the administration is required to maintain the status of Hong Kong as an international and regional aviation hub.
“In any event, it is definitely in the best interest of Hong Kong,” he added.
Yuen is also a commercial specialist with experience in disputes involving shareholders, partners or contracts. He specialises in corporate and personal insolvency, banking, insurance and international trade. Prior to his role as the secretary for justice, he was a former non-executive director of the Mandatory Provident Fund Schemes Authority, which oversees the city’s pension mechanism. He was also chairman of the Bar Association from 2007 to 2009.
After a stint in the government from 2012 to 2018, Yuen returned to private practice specialising in commercial law. His considerable experience in mainland-Hong Kong constitutional law may benefit Cathay, which counts its business in China as a key asset.
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HK$30 billion bailout for Cathay Pacific is necessary, Hong Kong government says
Both Tong and Yuen share experience on the government’s Exchange Fund Advisory Committee, headed by finance chief Chan, who engineered the rescue package for Cathay.
Their membership overlapped on the committee, on which Tong spent a decade before leaving earlier this year while Yuen joined in 2018 for a four-year term.
The government sourced the billions in bailout funds for Cathay through its financial reserves in the Land Fund, which is ultimately overseen by the Exchange Fund for investment purposes.
Both Tong and Yuen have considerable experience of Hong Kong and mainland China affairs and can draw upon legal, financial services and accounting sectors bolstering the knowledge on the company’s soon to be 19-strong board, stacked with allies from major shareholders Swire Pacific and Air China.
Until Cathay Pacific redeems its preference shares and repays its bridging loan, the two observers will remain on the board. The airline has said it expects to redeem the preference shares and the bridging loan within three to five years. Chan earlier described the help as a medium-term investment.
Observers have no voting rights, compared with full board members.
Welcoming the observers, Cathay Pacific chairman Patrick Healy said the airline looked forward to working closely with Tong and Yuen in their new roles.
The bailout package consisted of HK$19.5 billion in preference shares with detachable warrants, potentially giving the government a 6.08 per cent stake in the carrier, and a HK$7.8 billion bridging loan, which the airline has not tapped yet.
Bernard Chan, one of the Carrie Lam’s top advisers, has been a Cathay Pacific independent non-executive director since 2018.
Healy said on Monday that the airline’s attention was on reviewing its business overhaul to make it fit for a post Covid-19 era of depressed travel demand.
Cathay Pacific and its subsidiaries – ranging from cargo and airport businesses to frequent flier and laundry interests – received HK$680 million in the first phase of the government’s wage support scheme, helping at least 25,884 employees.
