CDB Leasing Falls in Worst Major Hong Kong Debut in 3 Years

  • Drop is biggest since Langham Hospitality’s decline May 2013
  • Plane-leasing company priced shares at HK$2 each in its IPO

China Development Bank Financial Leasing Co. fell in its trading debut in Hong Kong after the aircraft lessor raised $799 million in an initial public offering priced near the low end of a marketed range.

The company, which sold 3.1 billion shares at HK$2 each in its IPO, dropped 7 percent to close at HK$1.86. That’s the worst debut on the Hong Kong stock exchange in three years for a major first-time share sale, according to data compiled by Bloomberg. No stock sale of $500 million or more has fallen as much in its first day of trading since Langham Hospitality Investments Ltd. dropped 9.2 percent on May 30, 2013.

The listing by China Development Bank Financial Leasing, an arm of China’s biggest policy lender, comes two months after Bank of China Ltd.’s BOC Aviation Ltd. held Asia’s second-biggest initial share sale this year. Burgeoning travel demand in Asia, poised to overtake the U.S. as the world’s biggest aircraft market, has spurred investment in plane-leasing, which can provide lucrative returns locked in multiyear contracts.

CDB Leasing broke a record of having the largest proportion of shares allocated to cornerstone investors for any Hong Kong listing of at least $500 million, according to data compiled by Bloomberg. It also set a record for the highest proportion allocated to a single cornerstone buyer in any major listing in the city, with state-owned power generator China Three Gorges Corp. purchasing 42.1 percent of the IPO shares, the data show.

The uptake by cornerstone investors reflects their confidence in the plane-leasing company, Hu Huaibang, chairman of China Development Bank, and Fan Xun, executive director of CDB Leasing, said separately after a ceremony at the Hong Kong Exchange Monday.

BOC Aviation ended its first day of trading on June 1 at HK$42, unchanged from the price set in its IPO which raised $1.1 billion.

CDB Leasing’s offering adds to the $6.6 billion raised from first-time share sales in Hong Kong this year, down from $17.4 billion in the same period in 2015, the data show.

Aircraft leasing made up 45 percent of CDB Leasing’s total revenue last year, according to its prospectus. The company owned and managed 191 aircraft as of December, with another 224 in the pipeline from orders and commitments.

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