Negotiations on the purchase of operating lessor AWAS are being delayed owing to the market meltdown in China, sources indicate.
Trading in the nation's stock market halted twice over the past week, triggering a further weakening of the yuan.
Talks with ICBC Financial Leasing and Bohai Leasing are "temporarily stalled until the storm quiets", says a leasing source, adding: "Now, is not the time to be seen pouring money into an overseas asset, as things need to be fixed back home."
AWAS shareholders Terra Firma and Canadian Pension Plan Investment Board are looking to sell a 200-aircraft portfolio.
Another lessor adds: "While there was definitely a green light on all sale talks at the close of last year, that light has since turned amber. The intent to sell the portfolio is still there, but talks have simmered right down amid the volatility and uncertainty."
A separate leasing source indicates that "pricing negotiations have also stalled" on the portfolio sale, but would not be drawn on the reasons for the setback.
AWAS has been slimming down its portfolio during the past 12 months. It sold 30 aircraft through an asset-backed securitisation in July and signed a deal to offload 89 assets to Macquarie Group in March. That deal is due to be completed in February.
Earlier this month, Bohai parent HNA Group competed its takeover of Avolon in a move that valued the target at $7.6 billion. The price equates to 1.7 times Avolon's book value and allowed Bohai to merge the Irish lessor with Hong Kong Aviation Capital, its existing leasing entity, to create a larger global force.
The purchase of AWAS would further boost HNA's aviation portfolio, which includes leasing, airlines and infrastructure.
ICBC Leasing has been actively growing its presence in the aviation sector during the past couple of years. In March 2015, it signed a purchase agreement with Comac for 30 ARJ21-700 regional jets, following its 2011 commitment for 45 Comac C919 narrowbodies.
Previously, the Chinese lessor attempted to acquire ILFC in 2012, as part of a Chinese consortium, but the deal fell through after the bidders repeatedly missed deadlines in the bidding process.
Goldman Sachs is representing Terra Firma in the sale of AWAS, say sources, but does not have a mandate to proactively sell the lessor. It is unclear if the AWAS sale would also include employees.
AWAS, Bohai and ICBC were unavailable for comment.
Source: Cirium Dashboard
