CDB’s leasing arm set for $7.6 billion Hong Kong IPO

A record 79 per cent of the new shares to be offered to cornerstone investors

PUBLISHED : Tuesday, 21 June, 2016, 8:27pm
UPDATED : Tuesday, 21 June, 2016, 8:27pm

China Development Bank Financial Leasing is planning to raise up to $978 million (HK$7.6 billion) in a Hong Kong initial public offering which could set a new five-year record for locked-up shares

The Shenzhen-based lessor, which mainly leases aircraft but also ships, large industrial vehicles and construction machinery, is offering 3.1 billion new shares at HK$1.90 to HK$2.45 apiece.

The company aims to price the deal on June 30 and start trading July 11, according to Bloomberg.

Victor Au, chief operating officer at Delta Asia Financial, said the leasing arm of the nation’s biggest policy lender may see its share price retreat short term, as a result of the IPO.

“The Hong Kong equity market has been highly volatile over the past two months amid potential risks,” said Au.

“I do not expect the newly listed company to see its share price rising in such a volatile market.”

I do not expect the newly listed company to see its share price rising in such a volatile market
Victor Au, chief operating officer at Delta Asia Financial

Au also warned interest in aircraft leasing investment may slow further after Asia’s largest aircraft lessor, BOC Aviation owned by Bank of China, has been trading below offer price since its June 1 trading debut on the Hong Kong exchange.

“Even with the support of China’s sovereign wealth fund and big companies, BOC Aviation has failed to see its share price remain above its offer price,” said Au.

BOC Aviation’s lacklustre performance over the past month has weakened interest in the aircraft leasing industry, he added, which will have a negative effect too on CDB Leasing’s performance.

According to data compiled by Bloomberg, the CDB Leasing IPO will offer as much as 79 per cent of the base deal to cornerstone investors, who will have to commit to holding the stock for six months in return for earlier and guaranteed allocation.

That would be the biggest proportion for any major Hong Kong listing in the past five years.

One single investor, state-owned power generator China Three Gorges, has already agreed to buy around 42 per cent of the IPO shares, said Bloomberg, with China Reinsurance Group and China State Shipbuilding Corp, also buying into the offering.

Au said, however, he remained positive long-term for the aircraft leasing sector, given China’s booming business travel sector.

“Rich people want to buy personal aircraft, and hate being forced to stand in a queue for a flight.

“There remains a lack of adequate supply in the aviation market,” said Au.

“From that perspective, the future for aircraft leasing is bright.”