Air China Ld CONNECTED TRANSACTION AIRCRAFT FINANCE LEASE (4335N)

TIDMAIRC

RNS Number : 4335N

Air China Ld

09 May 2018

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.

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  :   One Boeing B777-300ER aircraft. According to 
  Lease                       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      :   During the Rental Periods, the rental fee for 
  payment                     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    :   The rental arrangement fee under the Finance 
  fee and the payment       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. ( 
                              ), 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. ( 
                              ), 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 
                              ( 
                              ), 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 
                              ( 
                              ), 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 Limited

   Zhou 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

This information is provided by RNS

The company news service from the London Stock Exchange

END

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May 09, 2018 02:00 ET (06:00 GMT)