Three of China's top lessors are already making plans to list in Hong Kong in the near to medium term. BOC Aviation, an arm of Bank of China Group , aims to raise $1 billion to $1.5 billion from an initial public offering next year, while China Development Bank's leasing business is also planning a $1 billion IPO within the same time frame, people with knowledge of the matter said.
Minsheng Financial Leasing Co. Ltd., controlled by China Minsheng Banking Corp. Ltd., meanwhile, plans to go public in both Hong Kong and Shanghai by 2018, according to its website.
If their IPOs succeed, these companies will join Hong Kong-based China Aircraft Leasing Group Holdings Ltd . , which raised US$94 million in a Hong Kong IPO in July, becoming Asia's first publicly traded aircraft lessor. Its shares have risen 50% since listing.
The trend is being driven partly by leasing companies' need to raise capital to fund further expansion, as their clients, major airlines, seek to meet growing demand for air travel in China and the rest of Asia.
BOC Aviation said this week it has placed an order for 22 Boeing 737 aircraft, scheduled for delivery from 2018 to 2021. It already owns and manages 253 aircraft operated by 59 airlines world-wide, and had committed to buy 203 more as of the end of September. CDB Leasing, meanwhile, plans to more than double the size of its 180-strong aircraft fleet.
They still have some way to go before catching up with their largest international peers. New York-listed AerCap Holdings NV, the world's biggest lessor, has a fleet size of 1,300, and 458 more planes on order, with more than 200 customers in 90 countries.
But for investors, the emergence of aircraft-leasing companies onto the public markets offers another potential way to tap into Chinese consumers' growing spending power.
"There is a huge middle class [in China]. Incomes are rising. There are people that want to travel," said Sameer Sopori, BNP Paribas 's head of capital raising and financing for Asia Pacific. "Leasing is a sector that fits into a consumer-driven economy—a sector of choice from an investor's perspective."
Traffic from China's airlines alone increased 13% in the first quarter of this year from the same period a year earlier, surpassing 100 million passengers for the first time, according to data from CAPA Centre for Aviation, an independent aviation market-research firm. International travel by Chinese people surged 57% over the same period, though the country's domestic market still accounts for the majority of flights taken.
"We are seeing [increasing] demand in the global tourism market, especially outbound traffic from China and Asia," said Joanna Lu, head of advisory Asia with aviation consulting firm Ascend. "IPOs are a logical step for some leasing companies given their large capital expenditure plans to support the backlog scheduled for delivery over the next few years and their global ambitions."
More Chinese leasing firms are likely to tap equity markets as they move away from relying on debt financing, said Jeffrey Lowe, managing director of Hong Kong-based aviation-services company Asian Sky Group.
Bond issuance by Chinese aircraft-leasing companies has totaled US$3.8 billion since 2012, according to Dealogic data. BOC Aviation, China Development Bank Leasing Co. Ltd. and ICBC Financial Leasing Co. Ltd., the country's top three aircraft lessors, have also raised more than US$3 billion in loans in the past five years, Thomson Reuters data shows.
Leasing companies want to have a balance between debt financing and equity funding, Mr. Lowe said: "They don't want to have all their eggs in one basket."
A number of China's aircraft lessors are units of banks. Spinning them off will also give these financial institutions the chance to monetize their value, BNP Paribas's Mr. Sopori said.
China's leading policy body, the State Council, encouraged financial leasing companies to seek listings in its latest guidelines for the sector issued in September.
BOC Aviation announced its IPO plan in October without saying how much it intends to raise. It declined to comment further. CDB Leasing and Minsheng Leasing couldn't be reached for comment.
Source: Wall Street Journal by Kane Wu
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