HONG KONG (BLOOMBERG) - Cathay Pacific Airways shares rallied the most since 2008 on Wednesday (June 10) after the carrier said it plans to raise HK$39 billion (S$7 billion) from the government and shareholders to avoid collapse.

The carrier soared 19 per cent in Hong Kong's premarket as trading resumed after Tuesday's suspension. Its proposed recapitalization plan includes the issuance of preference shares, warrants and rights, as well as an extension of a bridge loan. The plan is subject to shareholder approval at an extraordinary general meeting around July 13.

Analysts at Credit Suisse Group downgraded Cathay shares to the equivalent of sell after the plan was announced, saying in a note that the prospect for recovery "remains dim." Daiwa Securities Group also cut its rating to sell, saying minority shareholders will be diluted by Cathay's issuance plans.

Cathay's shares had lost more than 20 per cent this year before Wednesday's move. Even before the pandemic, it was under enormous financial strain due to Hong Kong's anti-government protests, which affected traffic numbers and led to the exit of the company's former chief executive officer.

The airline posted an unaudited loss of more than HK$2 billion in February alone, and since then it has been losing HK$2.5 billion to HK$3 billion a month. Its main shareholders Swire Pacific, Air China and Qatar Airways have undertaken to vote in favor of all resolutions for the recapitalization plan.