The leasing business generated HK$1.4b profits in 2015.
Fitch Ratings said that Cheung Kong Property Holdings Limited's plan to acquire the aircraft leasing business of CK Hutchison Holdings Limited is consistent with management's plans to explore investment opportunities outside Hong Kong and diversify its sources of recurring income, Fitch Ratings says.
The aircraft leasing business generates high-quality recurring income with low execution risks, given the full tenor of leases in this industry generally run for about 10 years or more. The business that CKP is acquiring has been managed by a specialised unit employed by CKP since the start of operations.
Here's more from Fitch Ratings:
The aircraft leasing business generated EBITDA of HK$1.4b in 2015 and a total fleet of 66 aircraft and a diversified customer base of more than 25 airlines, according to CKHH's annual report for 2015.
Fitch views the transaction as neutral to CKP's rating, as the scale of the aircraft leasing business will remain small relative to its property business. CKP will remain focussed on seeking land replenishment opportunities with reasonable returns. The company has ample liquidity with HKD50.3bn cash on hand as at end-June 2016, more than sufficient to settle the total net cash payable of HKD6.3bn for the acquisition.
CKP says it is in a net cash position and is considering other investment opportunities to generate stable income in the long term. Fitch estimates that any investment CKP makes is not likely to put immediate pressure on the company's credit metrics until the total value of its new investments exceed HKD30bn, provided the new investments are able to generate stable operating cash flows.
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