The proposed US$600m IPO of Hong Kong Airlines International will no longer come with a renminbi tranche as the carrier wants to move forward with its Stock Exchange of Hong Kong listing plan after months of delay, according to sources close to the deal.
The decision came after China’s central bank allowed the renminbi to fall nearly 4% against the US dollar last week. The People’s Bank of China explained the sudden move was a one-off switch to a more market-oriented exchange rate.
The original plan of the airline, which has the backing of Chinese conglomerate HNA Group, was to be the SAR’s first IPO to be denominated in both the renminbi and Hong Kong dollars. It filed an application in September 2014, with the intention of listing in the second quarter of the year.
However, the carrier decided to abandon the renminbi tranche as regulators had too many questions on the IPO structure, leading to a delay in the listing process.
“The company opted for a dual-currency IPO as the SEHK had been advocating the idea of bringing such IPO to the city and had said it would grant full support for such deal,” said one of the sources. “However, what we have been experiencing is too many questions from the regulators and this complicates the process.”
The recent renminbi devaluation is not a key reason for dropping the related tranche. “The decision is basically made before the devaluation, but you can tell the issuer definitely has a stronger reason now to raise only Hong Kong dollars,” said another source.
The airline was aiming to tap the enormous retail renminbi deposit base in Hong Kong. The recent renminbi devaluation, however, has driven many retail investors to exchange renminbi back to Hong Kong dollars as they expect the currency to weaken further.
HK Airlines plans to raise US$600m from the IPO through the sale of 25% of its enlarged share capital.
According to the company’s application proof, it posted a earnings of HK$493.3m (US$63.62m) on revenue of HK$8.55bn in 2013, and HK$165.9m on revenue of HK$3.96bn for the first five months of 2014.
JP Morgan is sole sponsor for the transaction.
