Last checked at 9 May 2018 07:00
Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this announcement, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this announcement.
中國國際航空股份有限公司
Air China Limited
CONNECTED TRANSACTION AIRCRAFT FINANCE LEASE
AIRCRAFT FINANCE LEASE
On 8 May 2018, the Company entered into the Finance Lease Agreement with Beijing Leasing Company, pursuant to which Beijing Leasing Company agreed to provide finance leasing to the Company in relation to one Boeing B777-300ER aircraft in accordance with the terms and conditions of the Finance Lease Agreement.
LISTING RULES IMPLICATIONS
Beijing Leasing Company is owned as to 60% and 40% by CNACG and Capital Holding respectively, which in turn are wholly-owned subsidiaries of CNAHC, the controlling shareholder of the Company. Therefore, Beijing Leasing Company is a connected person of the Company, and the Aircraft Finance Lease constitutes a connected transaction of the Company under Chapter 14A of the Listing Rules.
As one or more of the relevant applicable percentage ratios set out in the Listing Rules in respect of the Aircraft Finance Lease is higher than 0.1% but less than 5%, the Aircraft Finance Lease is subject to the reporting, annual review and announcement requirements but is exempt from the shareholders' approval requirements under Chapter 14A of the Listing Rules. |
INTRODUCTION
On 8 May 2018, the Company entered into the Finance Lease Agreement with Beijing Leasing Company, pursuant to which Beijing Leasing Company agreed to provide finance leasing to the Company in relation to one Boeing B777-300ER aircraft in accordance with the terms and conditions of the Finance Lease Agreement.
THE FINANCE LEASE AGREEMENT
Date | : | 8 May 2018 |
Lessor | : | Beijing Leasing Company |
Lessee | : | The Company |
Aircraft under Finance Lease | : | One Boeing B777-300ER aircraft. According to the information provided by Boeing, the catalogue price of Boeing B777-300ER aircraft is about US$300 million. |
Lease term | : | 10 years, commencing on the Delivery Date. |
|
| The lease term of the Finance Lease Agreement shall be divided into consecutive rental periods, and every six (6) months shall be a rental period (the "Rental Period"). The first Rental Period shall commence from the Delivery Date. |
Principal amount | : | The principal amount under the Finance Lease Agreement is the RMB equivalent of the Financing Amount (i.e. US$100,000,000), calculated based on the actual exchange rate of US$/RMB applicable when Beijing Leasing Company purchases foreign exchange in order to pay such Financing Amount to the Boeing Company (the "RMB Financing Amount"). |
Rental fee and the payment | : | During the Rental Periods, the rental fee for each Rental Period consists of the principal and the interest. The total amount of the principal is determined based on the RMB Financing Amount, which shall be paid in equal amount of twenty (20) periods from the Delivery Date. The principal balance is amortized to zero when the lease term expires. |
|
| Interest accrued for each Rental Period shall be calculated based on the outstanding principal balance on the first day of such Rental Period multiplied by the applicable interest rate, in accordance with the actual days of such Rental Period on a 360- day year basis. The applicable interest rate for the first Rental Period is 80% of the Benchmark Rate on the Delivery Date, and the applicable interest rate for the remaining Rental Periods is 80% of the Benchmark Rate on the payment date of the rental fee for preceding Rental Period. Beijing Leasing Company shall provide the Company with the VAT special invoice for the rental fee (including the principal and the interest) no later than five (5) working days before each payment date of the rental fee or the payment date of the last payment, for the Company to use for VAT deductions. |
|
| Based on the present applicable interest rate, for a 10-year lease term, the total interest under the Aircraft Finance Lease is expected to be of no more than RMB150,000,000 (VAT inclusive). |
Rental arrangement fee and the payment | : | The rental arrangement fee under the Finance Lease Agreement is 0.5% of the Financing Amount, and shall be paid by the Company to Beijing Leasing Company in one lump sum prior to the Delivery Date. The rental arrangement fee is estimated to be of no more than US$500,000. |
|
| The Company may pay the rental arrangement fee to Beijing Leasing Company in RMB, which shall be the RMB equivalent of such rental arrangement fee calculated based on the corporate exchange rate of the Company for the month in which Beijing Leasing Company issues the aircraft delivery notice (the "RMB Rental Arrangement Fee"), and shall be confirmed by the Company and Beijing Leasing Company in writing. Beijing Leasing Company shall provide the Company with the RMB Rental Arrangement Fee payment notice and the VAT special invoice no later than five (5) working days prior to the date when the Company issues the aircraft delivery notice. |
Buy-back | : | Upon the expiry of the lease term of the Boeing B777-300ER aircraft, the Company is entitled to purchase such aircraft back from Beijing Leasing Company at a buy-back price of RMB1. |
Effectiveness | : | The Finance Lease Agreement is effective upon execution by the legal representatives or authorised representatives of the parties. |
REASONS FOR AND BENEFITS OF ENTERING INTO THE FINANCE LEASE AGREEMENT
The Aircraft Finance Lease has less impact on the Company's cash flow, and helps reduce the Company's financing costs. Beijing Leasing Company will issue VAT special invoice for the principal and the interests, which can be used for VAT deductions. Comparing with mortgage loans with same interest rates, it is estimated that the Company will reduce its financing costs by no more than US$3 million.
The terms and conditions of the Aircraft Finance Lease is agreed after arm's length negotiations between the parties. The Directors (including the independent non-executive Directors) are of the view that the Aircraft Finance Lease is on normal commercial terms, and that the terms of the Aircraft Finance Lease are fair and reasonable and in the interests of the Company and its shareholders as a whole.
LISTING RULES IMPLICATIONS
Beijing Leasing Company is owned as to 60% and 40% by CNACG and Capital Holding respectively, which in turn are wholly-owned subsidiaries of CNAHC, the controlling shareholder of the Company. Therefore, Beijing Leasing Company is a connected person of the Company, and the Aircraft Finance Lease constitutes a connected transaction of the Company under Chapter 14A of the Listing Rules.
As one or more of the relevant applicable percentage ratios set out in the Listing Rules in respect of the Aircraft Finance Lease is higher than 0.1% but less than 5%, the Aircraft Finance Lease is subject to the reporting, annual review and announcement requirements but is exempt from the shareholders' approval requirements under Chapter 14A of the Listing Rules.
Mr. Cai Jianjiang, Mr. Song Zhiyong and Mr. Xue Yasong, who are also directors or senior management of CNAHC, are deemed to have material interests in the transactions under the Finance Lease Agreement, and have abstained from voting on the relevant resolution at the Board meeting. Other than the Directors mentioned above, none of the other Directors has a material interest in such transactions.
GENERAL INFORMATION
The Company
The Company is incorporated in the PRC, whose H shares are listed on the Stock Exchange as its primary listing venue and on the Official List of the UK Listing Authority as its secondary listing venue, and whose A shares are listed on the Shanghai Stock Exchange. The principal business activity of the Company is air passenger, air cargo and airline-related services.
Beijing Leasing Company
Beijing Leasing Company is a company incorporated in the PRC with limited liability. Its registered capital is RMB1,000,000,000, and its registered address is located at No. 8, Zhuyuan Road, Shunyi District, Beijing, the PRC (Room 036, Floor 4, No. 4 Standard Factory Building, Tianzhu Comprehensive Bonded Zone). Its legal representative is Mr. Wang Zhengang. The business scope of Beijing Leasing Company is finance lease business, lease business, purchase of leased properties from domestic and abroad, residual value processing and maintenance of leased properties, leasing transaction consulting and guarantee, import and export of goods, import and export of technology, import and export of agency.
DEFINITIONS
In this announcement, unless the context otherwise requires, the following expressions have the following meanings:
"Aircraft Finance Lease" | the finance lease of the Boeing B777-300ER aircraft pursuant to the Finance Lease Agreement |
"Beijing Leasing Company" | CNAC Beijing Financial Leasing Co., Ltd. (中航（北京）融資租 賃 有限公司), a company incorporated under the laws of the PRC with limited liability |
"Benchmark Rate" | the interest rate for RMB loan for above 5 years prescribed and announced by the People's Bank of China from time to time |
"Board" | the board of the Directors |
"Boeing Company" | Boeing Company, a company incorporated in the State of Delaware of the United States of America |
"Capital Holding" | China National Aviation Capital Holding Co., Ltd. (中國航空資本控 股有限責任公司), a limited liability company incorporated under laws of the PRC and a wholly-owned subsidiary of CNAHC as at the date of this announcement |
"CNACG" | China National Aviation Corporation (Group) Limited (中國航空 （集團）有限公司), a company incorporated under the laws of Hong Kong and a wholly-owned subsidiary of CNAHC as at the date of this announcement |
"CNAHC" | China National Aviation Holding Corporation Limited (中國航空 集團 有限公司), a state-owned enterprise incorporated under the laws of the PRC and the controlling shareholder of the Company |
"Company" | Air China Limited, a company incorporated in the PRC, whose H shares are listed on the Stock Exchange as the primary listing venue and on the Official List of the UK Listing Authority as the secondary listing venue, and whose A shares are listed on the Shanghai Stock Exchange |
"connected person" | has the meaning ascribed thereto under the Listing Rules |
"Delivery Date" | the date on which Beijing Leasing Company delivers the Boeing B777-300ER aircraft to the Company pursuant to the Finance Lease Agreement |
"Director(s)" | the director(s) of the Company |
"Finance Lease Agreement" | the aircraft finance lease agreement entered into between the Company and Beijing Leasing Company on 8 May 2018, pursuant to which Beijing Leasing Company agreed to provide finance leasing to the Company in relation to one Boeing B777-300ER aircraft in accordance with the terms and conditions thereof |
"Financing Amount" | US$100,000,000 |
"Hong Kong" | the Hong Kong Special Administrative Region of the PRC |
"Listing Rules" | The Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited |
"RMB" | Renminbi, the lawful currency of the PRC |
"Stock Exchange" | The Stock Exchange of Hong Kong Limited |
"US$" | United States dollars, the lawful currency of the United States of America |
By Order of the Board
Air China LimitedZhou Feng Tam Shuit Mui
Joint Company Secretaries
Beijing, the PRC, 8 May 2018
As at the date of this announcement, the directors of the Company are Mr. Cai Jianjiang, Mr. Song Zhiyong, Mr. John Robert Slosar, Mr. Xue Yasong, Mr. Wang Xiaokang *, Mr. Liu Deheng*, Mr. Stanley Hui Honchung* and Mr. Li Dajin*.
* Independent non-executive director of the Company