Narrative
Full Description
Project narrative
On July 14, 2015, Global Aircraft Leasing Co., Ltd. (GALC) — a Cayman Islands-incorporated special purpose vehicle (SPV) and wholly owned subsidiary of Hong Kong Bohai Leasing Asset Management Corp., Ltd., itself a Hong Kong-incorporated wholly-owned subsidiary of Tianjin Bohai Leasing Co., Ltd., which is wholly owned by Bohai Leasing Co., Ltd. — and Bohai Leasing Co., Ltd. — a Chinese aircraft leasing company listed on the Shenzhen Stock Exchange with Chinese conglomerate HNA Group Co., Ltd. via HNA Capital Group Co., Ltd. as its largest shareholder — signed a tender offer agreement for the acquisition of a 20% equity stake in Avolon Holding Limited — a Cayman Islands-incorporated Ireland-based aircraft leasing company — with Avolon and its shareholders for a consideration of $429 million USD, $26 USD a share,. Then, AVIC Capital, a subsidiary of state-owned Aviation Industry of China, which had previously in 2014 attempted to purchase Avolon, made another offer for Avolon. As a result, in August 2015, Bohai raised its offer for $31 USD per share, but for the entirety of Avolon. Then, on September 3, 2015, Bohai Leasing and Mariner Acquisition Ltd. — a Cayman Islands-incorporated SPV and indirect wholly-owned subsidiary of Bohai Leasing — signed the merger agreement with Avolon for the acquisition of a 100% equity stake in Avolon for a consideration of $2,555,286,817 USD (RMB 16.239 billion) and a termination agreement for the previous 20% acquisition deal. On or around December 28, 2015, the New York Branch of the Bank of China (BOC) issued a $1.855 billion USD term loan to Global Aircraft Leasing Co., Ltd. (GALC) to facilitate the acquisition of a 100% equity stake in Avolon Holdings Limited. This loan carried a maturity period of seven years and a final maturity date of December 28, 2022. Bohai Leasing appointed BOC NY Branch to provide the loan to facilitate the acquisition in October 2015. Bohai Leasing, Tianjin Bohai Leasing Co., Ltd., Hong Kong Bohai Leasing Asset Management Corp., Limited, and HNA Capital Group Co., Ltd. issued joint and several liability guarantees for this loan. This loan was secured by (i.e. collateralized against) a pledge of the 100% equity stake in Avolon Holdings held by GALC to the lender. The loan’s principal amount outstanding was $1,669,500,000 USD as of March 31, 2018. In addition to the BOC loan, HNA Capital Group Co., Ltd. issued a $193 million USD short-term loan to Bohai Financial Holdings Co., Ltd. to pay the deposit for the acquisition. In total, bank loans accounted for approximately 70% of the funds for the acquisition, while Bohai Leasing's own funds accounted for approximately 30%. Avolon is a Dublin-headquartered aircraft leasing company. It was launched in May 2010 with the backing of private equity firms. It listed on the New York Stock Exchange in December 2014 at $20 USD a share after takeover talks collapsed. At the time of the merger, Avolon owned and managed 259 jets. The acquisition was to be completed in the first quarter of 2016. The acquisition was completed on January 8, 2016 with GALC holding one common share of Avolon, with the rest of the shares cancelled and Avolon's shares suspended from trade on the New York Stock Exchange. The deal valued Avolon at $7.6 billion USD including debt. This was the largest overseas acquisition by an A-share listed company. Bohai Leasing retained Domhnal Slattery, Avolon’s founder, and other senior executives after the acquisition. Avolon was integrated with the assets of Hong Kong Bohai Leasing Asset Management Corp., Limited took a 37.05% stake in Avolon, with GALC holding 62.95% of the shares. On August 8, 2018, Bohai Financial Holdings announced that GALC would sell a 30% stake in Avolon to Japan's ORIX Corporation for $2.212 billion USD (RMB 13.912 billion); ORIX agreed to pay the remaining $1.6695 billion USD BOC loan at the time of equity delivery, allowing the collateral pledge to be released.
Staff comments
1. Some sources refer to the $1.855 billion USD term loan as a planned syndicated loan (note: multiple BOC branches participating would qualify as syndicated loan). This issue warrants further investigation.