CALC Launches China’s First Foreign Currency Asset-Backed Security
CALC (the “Group”, SEHK stock code: 01848), a full value-chain aircraft solutions provider for global airlines, has launched China’s first asset-backed security (ABS) which is denominated and settled in a foreign currency, and the first ABS in aircraft leasing in the public placement market.
China Asset Leasing Company Limited, a company registered in Tianjin by the Group, is the issuer of this ABS, which will have aircraft leasing assets as its underlying assets, and Huatai Securities (Shanghai) Asset Management Co. Ltd. (Huatai Securities Asset Management), is the manager. The ABS denominated in USD was listed on the Shanghai Stock Exchange.
Filling the void in the China market, attracting domestic USD investors.
As China’s first asset securitized product denominated and settled in foreign currency, this ABS has set a precedent as a major financial innovation, marking a milestone in China’s asset securitization development history.
1, Diversifying USD investment product offerings by providing high-quality products in China.
Currently, USD-denominated fixed-income products in mainland China lack investment options. This ABS product is denominated and settled in USD, which adds diversity to the types of financial products available in China, fills the void of ABS products in foreign currency, and provides an important investing and hedging tool for domestic investors. It also provides a high-quality product category for USD-based funds for enterprises and institutions in mainland China. Going forward, it is hoped that the USD-based asset pool will gradually develop in mainland China, attracting more USD investment and helping investors to achieve stable returns and reduce the outflows of USD-assets from China. Meanwhile, this will also serve as the price guidance for China’s fixed-income products both short and long-term.
2, Promoting the development of a diversified capital market, implementing the spirit of the 19th National Congress of the Communist Party of China, and promoting an open economy.
Because of the complexities involved with foreign currency, aircraft leasing assets, regulatory policies, and specialized transaction structures, the hurdles for innovation in aircraft leasing finance has always been high. Under the guidance of China Securities Regulatory Commission (CSRC), with strong support from the country’s foreign exchange department, Shanghai Stock Exchange and China Securities Depository and Clearing Corporation Limited jointly founded the first fixed income product denominated and settled in foreign currency. Over the span of two years, CALC and Huatai Securities Asset Management overcame numerous challenges to create a stable and viable product structure and trading arrangement that are in compliance with national policy.
Implementing the spirit of the 19th National Congress of the Communist Party of China is of great significance.
The ABS program is not only a meaningful implementation of the mandate from the 19th National Congress of the Communist Party of China (CPC), but also an important step by all parties involved in actively executing on the "One Belt One Road" (OBOR) strategy and supporting the real economy in accordance with the national foreign exchange administration policies, which serves an important and historic purpose.
This product category supports the OBOR construction with multi-level financial instruments.
The report from the 19th National Congress of the CPC pointed out that the focus must be on the construction of OBOR as part of the principle in attracting investment and investing overseas while strengthening innovation and encouraging cooperation. At the 2017 National Financial Working Conference, General Secretary Xi also pointed out that in order to develop OBOR, China must develop its financial platform and related financing mechanism.
In the meantime, in accordance with the “Civil Aviation Administration of China (CAAC)’s Proposed Action Plan for OBOR Initiative”, CAAC will continue to promote the liberalization of air rights of the countries and regions located along OBOR, focusing on the smooth convergence of domestic and international air route networks.
As a result, in order to execute on the OBOR strategy, strong financing support is required via multi-level financial instruments, including different options of financial and operating leasing to meet the growing demand for commercial aircraft to deliver the passenger traffic created from the construction of the OBOR. Therefore, this USD denominated ABS product category will serve an important purpose and historic role in the overall OBOR strategy.
Mr. CHEN Shuang, JP, Chairman of CALC, commented, “CALC is dedicated to developing innovative finance products with aircraft leasing as the underlying asset. We have set another precedent by introducing foreign currency denominated asset securitized products and providing the aviation industry and the leasing industry with a new financial product category. CALC also brought innovative ideas and practical experience to the aviation finance asset management sector in China. As always, CALC will support the development of the Aviation Silk Road as part of China’s One Belt One Road Initiative. By introducing innovative aviation financing, CALC will contribute to the building of a professional, comprehensive and diversified capital market and economy.”
Ms. Winnie LIU, Deputy Chief Executive Officer and Chief Commercial Officer of CALC, commented, “After successfully realizing the 40th aircraft lease receivables, we are delighted to have introduced the first aircraft leasing asset-backed security which is denominated and settled in foreign currency in the open market in China. Since introducing the realization of finance lease receivables into China in 2013, CALC has been exploring the development of a variety of products to meet investors’ ever-changing demands. The successful debut of this product category provides another safe, stable and innovative option for USD-denominated fixed income products which is still rare in China. We are deeply grateful for the support and recognition from the departments of the State Administration of Foreign Exchange, China Securities Regulatory Commission, Shanghai Stock Exchange and China Securities Depository and Clearing Company Limited. We would also like to thank the participating institutional investors who have put their trust in CALC and our products.”
As of September 2017, CALC ranked as one of the top 10 global aircraft lessors with its combined asset value of fleet and order book exceeding US$10 billion, according to ICF International, one of the world's largest and most experienced aviation and aerospace consulting firms. As at 27 December 2017, CALC has a fleet of 106 aircraft. CALC’s unique business model offers services covering an aircraft’s full life cycle to meet airlines’ fleet management requirements, including services for new aircraft, used aircraft and aircraft coming to the end of their life.