By Doug Cameron
Avolon Holdings Ltd. on Monday launched an initial public
offering of stock that values the Irish aircraft-leasing company at
$1.8 billion, in a test of investor appetite for stocks with
exposure to declining oil prices.
The private-equity-controlled company priced its offer of 13.6
million shares at $21 to $23 a share ahead of a planned New York
Stock Exchange listing under the ticker AVOL, according to a
regulatory filing. An enterprise value of more than $6 billion
would place Avolon among the top five publicly traded
aircraft-leasing companies.
A 20% fall in the average global price of jet fuel over the past
year has led to a surge in shares of airlines. It has also stirred
worries over a potential bubble in aircraft orders if carriers
defer some of the record backlog of new fuel-efficient jets because
of the fuel-price drop.
Avolon is proceeding with its IPO after the collapse of takeover
talks with a number of potential buyers in Asia, including Avic
Capital Co. of China. Avic said Monday that it has dropped its
offer after Avolon rejected its approach, echoing the abortive
takeover last year by a Chinese consortium of Avolon's larger
rival, International Lease Finance Corp.
Airbus Group NV and Boeing Co. both have record order backlogs,
and have played down the impact of falling fuel prices. The jet
makers and leasing companies maintain that airlines decide to buy
new jets because of potential fuel and other efficiency savings
garnered over many years, and don't react to short-term changes in
oil prices. Executives have said requests for order cancellations
and deferrals are running below their historical average.
However, investors have pulled back from some lessors in recent
months, while airline stocks have soared. AerCap Holdings NV, the
world's largest jet lessor, which bought control of ILFC, is up 16%
this year, but has lost 6.6% over the past three months. Air Lease
Corp., the second-largest listed lessor, has climbed 22% in
2014.
Like rival Aircastle Ltd., Air Lease has outperformed the
S&P 500 this year and over the past quarter.
Avolon owns a fleet of 122 mainly narrowbody aircraft with a
book value of $5.3 billion and manages 12 more for other investors
leased to 48 airlines. It has a $6.6 billion order book for 74
jets, including Boeing 787s, and intends to purchase A330neos from
Airbus.
Avolon was launched in May 2010 with private-equity backing by a
group of former Royal Bank of Scotland PLC executives. Its largest
shareholders are Cinven Partners LLP, CVC Capital Partners, Oak
Hill Capital Partners and an affiliate of the Government of
Singapore Investment Corp.
Write to Doug Cameron at doug.cameron@wsj.com
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