Singapore: Bank of China has hired Goldman Sachs and BOC International as joint sponsors for a $3 billion Hong Kong listing of its aircraft leasing arm, people with knowledge of the matter said.
Bank of China plans to launch the initial public offering (IPO) of Singapore-based BOC Aviation in the second quarter of this year, the people said, in what is set to be the world's biggest listing by an aircraft lessor.
The IPO comes as Asian lessors raise funds to challenge Western rivals in the nearly $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, plans to raise $1 billion in another IPO set for the second-quarter 2016, the people said.
"There won't be any shortage of investors because they are looking at not just an aircraft leasing company (BOC Aviation) but at a company whose future is entrenched in Asia Pacific. It's a growth story," said Shukor Yusof, an analyst at Malaysian aviation consultancy Endau Analytics.
Morgan Stanley has been hired as joint global co-ordinator for the lessor's IPO, the people said, adding that the final deal value could change depending on market conditions and more banks could join the deal. The people declined to be identified because the information was not public.
BOC Aviation, formed after Bank of China's 2006 purchase of a firm formerly backed by Singapore Airlines, has grown to become Asia's second-biggest lessor with a portfolio of about 250 planes valued at $9.4 billion, according to estimates from industry publication Flightglobal.
The lessor, which has an investment grade rating, has already tapped into different sources of financing, including offshore renminbi-denominated bonds.
Longer-term investors such as insurers and pension funds are warming up to the sector as aircraft leases offer fixed incomes and are often seen as safe transactions. Paid for in United States dollars, aircraft are comparatively easy to re-lease to different geographies.
"Investors should avoid airlines but aircraft leasing companies are among the best assets investors can go for because you are looking at returns of at least 12 to 13 per cent a year," said Endau Analytics' Yusof.
BOC Aviation posted a 5 per cent rise in net profit to a record $171 million in the first half to June 2015. Goldman Sachs and BOC Aviation declined to comment. Bank of China and BOC International, its investment banking unit, declined to comment, while Morgan Stanley was not available to comment.
China Aircraft Leasing is the only listed aircraft lessor in Asia, while the US has a few listed sector players including AerCap Holdings and Air Lease.
At least five Asian companies, including units of Sumitomo Mitsui Financial Group Inc and Industrial and Commercial Bank of China Ltd as well as BOC Aviation, now rank among the world's top 15 aircraft lessors, according to Flightglobal.
GECAS, a unit of General Electric and AerCap dominate the sector in which the top 50 lessors control a fleet of just over 7,800 planes valued at nearly $217 billion.