Boarding begins for BOC Aviation's $1.5b IPO

Singapore-based BOC Aviation, a subsidiary of Bank of China, is selling shares to raise funds for more new aircraft.
Singapore-based BOC Aviation, a subsidiary of Bank of China, is selling shares to raise funds for more new aircraft. PHOTO: REUTERS

Boeing, China Investment Corp among investors in Asia's biggest aircraft-leasing firm by asset value

HONG KONG • BOC Aviation, Asia's biggest aircraft-leasing company by asset value, has attracted investors including Boeing and China Investment Corp, to buy shares in its US$1.1 billion (S$1.5 billion) initial public offering (IPO) yesterday.

Also among its 11 cornerstone investors are China's state-backed Silk Road Fund which will invest US$100 million and compatriot CDB International which has committed US$60 million.

Singapore-based BOC Aviation, a subsidiary of Bank of China (BOC), is betting on booming demand for air transportation in the world's second-largest economy. The lessor - the world's fifth-largest by fleet size and fourth-largest by fleet value, according to its IPO prospectus - is selling shares to raise funds for more new aircraft.

"Aviation is a growth sector, so they are clearly raising capital to fund expansion," said Zhang Qi, an analyst with Haitong Securities Co. "Going public is also a way to diversify risks. It would be too risky for a company to just depend on debt and loan instruments alone."

China will become the "single- most important market" for plane- leasing companies over the next five years, Mr Domhnal Slattery, chief executive officer of lessor Avolon Holdings, said recently.

United States planemaker Boeing forecasts Chinese demand of 6,330 new airplanes over the next 20 years with a total value at nearly US$1 trillion, making China one of the biggest markets for the aircraft manufacturing industry.

With this IPO, BOC Aviation will become the second dedicated Asian air lessor to go public after smaller competitor China Aircraft Leasing Group Holdings made its debut in Hong Kong in July 2014.

BOC is selling new shares in BOC Aviation at a fixed price of HK$42 (S$7) each. It said last week the IPO would value its aviation leasing unit at about US$3.8 billion.

The offering would be the biggest for an aircraft lessor since Air Lease Corp raised US$801 million in a 2011 IPO.

The IPO comes as Asian lessors raise funds to challenge Western rivals in the nearly US$217 billion global industry, with huge orders or acquisitions to service the world's fastest-growing aviation market.

Rival CDB Leasing, owned by state- controlled China Development Bank Corp, plans to raise US$1 billion in an IPO set for the second quarter of this year, people familiar with the matter previously told Reuters.

Cornerstone investors have taken up 52 per cent of BOC Aviation's base offering and have agreed to hold on to their shares for six months. The shares are set to start trading on June 1.

BLOOMBERG, REUTERS

A version of this article appeared in the print edition of The Straits Times on May 17, 2016, with the headline 'Boarding begins for BOC Aviation's $1.5b IPO'. Print Edition | Subscribe