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Press releases

Avolon
14 July 2015

Bohai Leasing to acquire 20% strategic interest in Avolon for US$429 million

Cash tender offer at US$26 per share representing 14.5% premium to last week's VWAP and 30% premium to IPO price

Strategic investment will strengthen Avolon's relationships in the highly attractive Chinese aviation market

Avolon, the international aircraft leasing company, and Bohai Leasing Co., Ltd. (SZSE: 000415) ("Bohai"), the Chinese leasing and financial services company affiliated with HNA Group, today announce that they have entered into an agreement under which Bohai will make a cash tender offer for 20% of the outstanding common shares of Avolon at a price of US$26 per common share (the "Transaction"). The Transaction will be open to all Avolon shareholders.

The cash tender offer of US$26 per share represents a 14.5% premium to Avolon's volume-weighted average price last week (July 6 - 10, 2015) and a 30% premium to Avolon's Initial Public Offering at US$20 per share in December 2014, reflecting the substantial embedded equity value of Avolon's existing portfolio and its sector-leading platform.

This strategic investment by Bohai reinforces Avolon's position as a leading independent aircraft lessor and allows Bohai to more rapidly expand its exposure to the global aircraft leasing sector. Bohai's strong presence in the aviation and transportation finance and leasing sectors in China will help strengthen Avolon's relationships in the rapidly growing Chinese aviation market.

The Directors of both Avolon and Bohai unanimously support the Transaction and believe this strategic investment by Bohai will deliver long-term value for shareholders in both companies.

Denis Nayden, Avolon’s Chairman, commented: “Our objective at Avolon is to accelerate our growth and build on our position as a leading global aircraft lessor. Bohai Leasing’s strategic investment enhances Avolon’s profile, positioning and relationships in the Chinese aviation market – a market which we believe offers one of the most compelling growth opportunities in global aviation over the next two decades. Today's announcement is another positive step in the Avolon journey and we are excited by the growth potential and prospects for the business.”

Dómhnal Slattery, Avolon’s CEO, commented: “The acquisition of a 20% stake in Avolon by Bohai, at a premium to our current share price, reflects their confidence in the outlook for the sector, the attractiveness of the Avolon investment case and the strength of our global franchise. We are proud to welcome Bohai as a strategic investor in Avolon and look forward to developing our relationship with both Bohai and the broader HNA Group”.

Chris Jin, CEO of Bohai, commented: “Avolon is a leading global player in the aircraft leasing industry and we are delighted to announce this strategic investment. Our vision at Bohai is to build each of our transportation finance businesses into global leaders for the benefit of Bohai shareholders. This investment in Avolon will bring Bohai an increased presence in the global aircraft leasing sector and Bohai will have a strong interest in benefiting from Avolon’s profitable growth.”

Bharat Bhise, CEO of Bravia Capital, commented: “We are pleased to have brought this investment opportunity to Bohai Leasing which will expand its footprint in the global aircraft finance market. We believe that Avolon shareholders will also benefit from stronger relationships in one of the world’s fastest growing aviation markets. In structuring this transaction Bravia expects the investment will generate long-term value for shareholders in both companies.”

Transaction Overview
Bohai has committed to make a cash tender offer for 20% of the outstanding common shares of Avolon at a price of US$26 per common share. The cash tender offer is open to all Avolon shareholders and is expected to be formally launched on or about July 31, 2015 upon completion of Bohai’s shareholder approval process. To facilitate the approval process, HNA Group, Bohai’s largest shareholder, has agreed to vote its shareholding in Bohai in favour of The Transaction. The Transaction is not subject to any financing contingency or Chinese capital control approvals and is expected to complete by the end of August, 2015.

Avolon’s Sponsors and their Syndicatees have agreed to tender such shares into the offer as are necessary for Bohai to acquire a 20% shareholding in Avolon. The Transaction will further reduce the shareholding of Avolon’s Sponsors and their Syndicatees since Avolon’s Initial Public Offering in December 2014.

Concurrently with the closing of the Transaction, Avolon’s Shareholders’ Agreement will be amended to provide customary safeguards for the benefit of public shareholders and ensure that Avolon will retain full strategic flexibility including the ability to participate in industry consolidation opportunities and pursue other transactions to drive value for all shareholders. Bohai has committed to a standstill arrangement whereby it will be restricted from acquiring additional shares without the consent of the Avolon Board for a period of two years except in certain limited circumstances. In any event, Bohai has also committed not to increase its shareholding in Avolon above 30% unless as part of a fully-financed cash tender offer for all of the outstanding common shares of Avolon, which offer will be conditioned upon a majority of the shares held by shareholders other than Bohai being tendered. Avolon will retain full strategic flexibility to enter into a transaction with Bohai or any other third party, including a change of control transaction. Bohai has agreed to support any change of control transaction recommended by the Avolon Board by voting its shares as recommended by the Avolon Board. In addition, without the consent of the Avolon Board for a period of one year following the completion of the tender, Bohai will be subject to a lock-up arrangement that restricts the sale of its Avolon shares except in certain limited circumstances.

Following completion of the Transaction, Bohai will be entitled to nominate one non-executive Director to the Avolon Board.

Bravia Capital is serving as exclusive financial advisor to Bohai, and Sidley Austin LLP is serving as Bohai’s legal counsel. J.P. Morgan Securities LLC is serving as exclusive financial advisor to Avolon, and Weil, Gotshal & Manges LLP is serving as Avolon’s legal counsel.

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