Terra Firma Rejects Chinese Bids For AWAS

Private equity firm Terra Firma has rejected two bids from China's HNA Group for leasing group AWAS worth up to USD$2.2 billion, two people familiar with the matter said.

HNA made two offers for the leasing company after buying Ireland's Avolon through its Bohai Leasing arm last year for about USD$7.6 billion, the people said.

The first bid, late last year, valued AWAS in line with the underlying book value of its fleet, which is around USD$2 billion, excluding aircraft earmarked for sale.

A second relatively recent bid upped the value of the offer to reflect a roughly 10 percent premium to book value, one person said, asking not to be identified because the discussions remain confidential.

The total AWAS deal value including debt would be over USD$7 billion.

A spokesperson for HNA denied any knowledge of the AWAS bids.

Terra Firma and AWAS declined to comment.

GROWTH PLANS

Chinese lessors, mostly backed by state-owned banks, have been expanding as the country's major airlines open more routes at home and overseas.

Leasing company chiefs at Istat Americas, the air finance industry's major annual gathering held in Arizona last month, said they expected further consolidation in the sector.

HNA aims to use recently acquired Avolon as a starting point to break into the aircraft leasing industry's top three, alongside Netherlands-based AerCap and GECAS of the US.

Separately, a European banker said "aircraft leasing is a business where size matters" and that HNA had long been thought to be interested in expanding Avolon.

The current third-largest aircraft lessor, Dublin-based SMBC Aviation Capital, has also been reported to be interested in AWAS. The Japanese-owned company declined to comment.

AWAS has expanded considerably since its early days as the leasing arm of now defunct Australian airline Ansett. It has a fleet of 257 planes operated in 45 countries.

Terra Firma, run by British financier Guy Hands, bought 75 percent of AWAS from Morgan Stanley in 2006 in a deal worth USD$2.5 billion.

A year later it acquired rival Pegasus for USD$5.2 billion, merging the groups to create what was then the world's third-largest plane lessor.

Last year, Terra Firma agreed to sell a portfolio of 87 AWAS aircraft to Macquarie Group for USD$4 billion.