BOC Aviation set for trading debut on June 1 after raising more than US$500m from cornerstone investors such as CIC, Boeing
Eleven cornerstone investors have made commitments for 52 per cent of US$1.1 billion capital raising
The Bank of China’s aircraft leasing subsidiary BOC Aviation, has attracted a slew of investors including China’s sovereign wealth fund, mainland industrial conglomerate Fosun and US aerospace company Boeing in its US$1.1 billion initial public offering in Hong Kong.
The company, headquartered in Singapore, is expected to debut on the Hong Kong stock exchange on June 1st after nearly a dozen cornerstone investors agreed to purchase 52 per cent of the shares being offered at a fixed price of HK$42 apiece, according to the term sheet.
China Investment Corporation and the Silk Road Fund, set up to support infrastructure projects related to One Belt One Road, are the two biggest investors, allocating US$100 million each.
China Development Bank International will invest US$60 million. The policy bank’s own aircraft leasing unit China Development Bank Financial Leasing has also filed for an initial public offering in Hong Kong that is expected to raise US$1 billion.
Oman Investment Fund, China Life Insurance Co and Chinese private equity firm Hony Capital have each committed US$50 million. Fosun will invest US$35 million, while Boeing has signed on for US$30 million.
BOC Aviation owns and manages a fleet of 270 aircraft, and has another 241 on order. The company plans to use the funds raised from the IPO to fund pre-delivery payments and future purchases of additional aircraft. Bank of China will remain a substantial majority shareholder following the listing.
The size and pricing of BOC Aviation’s IPO was smaller than previously expected. Reuters had reported in January that the company was looking to raise US$3 billion, citing sources.
Spinning off its aircraft leasing unit will allow the Bank of China, the country’s fourth largest lender, to reduce the subsidiary’s reliance on debt and loan instruments for costly aircraft purchases.
Analysts say the high ratio of cornerstone investors in the deal and the fixed price offering are signs of the lack of market confidence.
“The Hong Kong stock market has come down from a high, it is not the best time,” a transportation research analyst not authorised to speak to the media said. “But it is a good, indirect way for these companies to tap China’s aviation industry growth potential, as the aircraft lessor presents lower operational risk and better return than airlines.”
According to Flightglobal Ascend's fleet analyser, BOC Aviation is Asia’s largest aircraft lessor by asset value.
BOC Aviation would become the second aircraft lessor listed in Hong Kong after China Aircraft Leasing Group.