Fun and games in the leasing market

Dino D'Amore
By Dino D'Amore May 16, 2016 15:46

Fun and games in the leasing market

As two Chinese lessors launch initial public offerings (IPOs) this summer, CIT Aerospace remains on the block and Aviation Capital Group (ACG) is moving towards IPO for no other reason than the fact that it is too large/successful to remain on the books of parent Pacific Life, much like PIMCO before it.

ACG has interest coming from smaller Chinese investors – I say smaller but the reality is they are large but not as large as the likes of Bohai or HNA for example, but they are companies seeking US dollar-denominated scale and they will pay to get it. Pacific Life on the other hand wants the best premium it can get for ACG. In that regard the company is no different from Terra Firma, owner of AWAS, which will sell at the right price, or if not, plans to grow AWAS at speed. Would CIT present enough value for Terra Firma though?

In all reality, as one former AWAS CEO likely lands at CDB Leasing, should we not argue that the very best move for AWAS should be for it to go back to its founding airline lessor principles and invest in Singapore-based Transportation Partners? Think about the logic on this: Transportation Partners can offer MAX and Neo order book opportunities that AWAS just cannot get anywhere else – The two, on paper at least, are a perfect match!

The BOC Aviation roadshow is well underway in Hong Kong lead by Goldman Sachs with Greg Lee running things from NYC and BOC International Holdings in Hong Kong, and thus far the cornerstone backing is strong at US$583 million.

China Investment Corp (CIC) and Silk Road Fund has committed $100 million; CDB International has surprised the market with a commitment for $60 million. Hony Capital, Oman Investment Fund and China Life are in for $50 million; Elion has committed $40 million, with Fullerton Funds Management in for $38 million and Fosun Group for $35 million. Boeing is another surprise investor committing $30 million and China South Industries AM commits $30 million. Boeing must be angling for leverage on a future order. Of course Boeing does have a large investment portfolio and, although it knows BOC Aviation very well and obviously considers it to be a safe investment.

Then there is BOC’s competitor CDB, which is also planning an IPO of the CDB Leasing arm that will follow on the coat tails of BOC Aviation’s listing. CDB’s investment in BOC Aviation is a pure investment decision and has absolutely nothing to do with the leasing arm of the business.

BOC Aviation Ltd has set a price of HK$42 a share for the offering which will raise US$1.1bn.

The only outstanding question is why so many cornerstone investors? The equity market has had a soft start to the year for sure but it is surprising that BOC Aviation felt the need to tie up so much investment from cornerstone investors. BOC Aviation has a rock solid pedigree and a stable business model but it seems that bankers are wary of its IPO success in a reviving marketplace. More will be revealed in the next few days.

We will like to give a special shout-out to the team from www.p4rgaming.com for sponsoring us.

Dino D'Amore
By Dino D'Amore May 16, 2016 15:46