Chinese state-owned China Aircraft Leasing Group Holdings Ltd. and a Bermuda-registered aircraft-leasing firm hope to take advantage of Asian airlines' growing interest in new, more eco-friendly aircraft, and surging demand from China.
China Aircraft Leasing, which is seeking to raise as much as US$133 million with its IPO, would be the first aircraft lessor to list in Hong Kong. The company, which is based in Hong Kong, plans to double its fleet to 64 by the end of 2016. It is set to price its IPO on July 4 and list on July 11.
The Bermuda-registered lessor has hired Citigroup Inc. to handle its Hong Kong listing plan. The formal name of the company planning the listing wasn't immediately available, but it has submitted its listing application and hopes to list by the end of the year, a person familiar with the situation said.
The plans by the aircraft lessors to go public in Hong Kong follow the high-profile collapse last year of a Chinese consortium's attempt to buy 90% of International Lease Finance Corp., the world's second-largest aircraft lessor by fleet size, from American International Group Inc. The US$4.75 billion deal failed partly because the group of buyers, which included Hong Kong private-equity firm P3 and two Chinese state-backed companies, moved forward before they got support from Beijing.
In December, AIG sold ILFC to Dutch jet-leasing firm AerCap Holdings NV for US$5.4 billion in cash and stock. GE Capital Aviation Services Ltd., or GECAS, is the world's largest aircraft lessor, and a unit of General Electric Co.
But demand for new planes from Asian airlines is growing, even in China, where the economy is slowing. A proliferation of budget carriers in the region and a move last year by China to lift a six-year ban on setting up new independent airlines helped to increase demand for new aircraft.
Heavy competition has also pushed many premium carriers to cut costs and refresh their fleets with planes that use less fuel. In February, Airbus Group NV said airlines in the Asian-Pacific region will lead global demand for larger and more fuel-efficient aircraft over the next 20 years.
Airlines in the region will take deliveries of about 10,940 new passenger and cargo aircraft, valued at US$1.8 trillion, between 2013 and 2032, accounting for roughly 42% of global deliveries in value terms for new aircraft, Airbus said.
Chinese companies, including banks, have been setting up their own lessors to compete with foreign firms such as GECAS. The market share of Chinese lessors in the nation's aircraft-leasing market rose to 37.8% in 2013 from just 9% in 2007, according to China Aircraft Leasing's listing prospectus.
Credit rating agency Fitch Ratings said in a recent note that Chinese aircraft lessors are playing an increasingly important role in the nation's rapidly growing commercial aviation market.
"While foreign lessors remain the largest players in China, local companies are increasingly placing direct orders with manufacturers to grow their fleets and internationalizing their operations to better compete," Fitch Ratings said in a note in June.
To fund the growing demand for airlines, lessors are tapping equity markets. China Aircraft Leasing, which is partly owned by state-owned conglomerate China Everbright Group, on Friday started taking orders from investors. It sold 131.8 million shares in an indicative price range of 5.53 Hong Kong dollars to 7.82 Hong Kong dollars (71 U.S. cents to US$1), according to its listing prospectus.
Founded in 2006, the aircraft lessor competes with the likes of BOC Aviation Ltd., a Singapore-based aircraft financial unit owned by Bank of China Ltd., ICBC Financial Leasing Co., the finance-leasing arm of Industrial & Commercial Bank of China Ltd., and CDB Leasing Co., the financing arm of China Development Bank, for business from airlines in China.
China Aircraft Leasing reported net profit to HK$173 million last year, up 81% from the previous year, and said it plans to pay not less than 30% of its profit as dividend after listing on the Hong Kong market, according to its listing prospectus.
China Yinsheng Asset Management Ltd. Chief Strategist Matthew Kwok said China Aircraft Leasing is attractive to investors because the lessor is a unique investment opportunity and also has a solid record of rising profit.
"I think the company can take advantage of the growing opportunities in the high-growth aircraft leasing market in China," Mr. Kwok said. "Also, strong profit growth can support its ability to pay stable dividends.
Source: Wall Street Journal by Yvonne Lee and Joanne Chiu
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