Best Funding Solution Highly Commended: Juneyao Airlines Co Ltd

Published: Jan 2020


Photo of Li Bing, Juneyao Airlines Co Ltd and Benjamin Che, Standard Chartered.

Cao Hongli

Assistant General Manager of Finance Department

Shanghai, China

Juneyao Air is a carrier based in Shanghai, China, operating both domestic and international flight services from two airports in Shanghai (Hongqiao and Pudong Airports). The company was founded in 2005 as a subsidiary of Shanghai JuneYao (Group) Co Ltd, and started its operations in September 2006.

in partnership with

The first ever syndicated loan for a Chinese airline company, a milestone for the whole industry

The challenge

The icon of Juneyao Airlines Co Ltd (hereinafter referred to as Juneyao Air) as an enterprise is an Auspicious Phoenix, an international interpretation of Chinese traditional cultures to express a century-old company and its devotion to providing the best service for its customers at home and abroad.

When it came to sourcing a funding solution, Juneyao Air, like the phoenix, burst into life. Founded in 2005, Juneyao Air’s payments and liquidity strategy was not up to task. The company wanted to centralise its foreign currency payments and collections, as its cash position varied among different entities.

The company approached Standard Chartered for help.

The solution

In order to meet this challenge, Juneyao Air took out a syndicated loan which was heavily oversubscribed, creatively structured as a credit loan backed by a corporate cross-border guarantee. This three-year HK$2.3bn syndicated term loan was for Juneyao Air’s general corporate purposes, with the borrower being Juneyao Air Hong Kong Subsidiary. The loan has a life of three years and Juneyao Air will commence loan repayments at the end of the first year and thereafter repay 10% every six months. The average life of the loan is two and a half years. The loan is priced at a margin of 160 basis points over Hibor.

As the first ever syndicated loan in the Chinese aviation industry, this deal was a significant milestone for Juneyao Air, for the capital market, and for the aviation industry as a whole. The innovative structure of the syndicated term loan backed by a corporate guarantee. This structure not only enabled long-term financing at a lower cost of Hibor but also resulted in a healthy oversubscription by investors.

Best practice and innovation

The bank acts as the sole mandated lead arranger, book-runner and underwriter, facility and security agent. This innovative structure involves a credit loan backed by a corporate guarantee, which is different from the traditional secured facilities in the aviation industry. A 247% oversubscription rate against the HK$1.8bn original deal size, evidences just how this innovative structure has drawn strong market attention and has received an overwhelming welcome by the investor community.

Key benefits

  • Represents the first ever syndicated loan for a Chinese airline company, a milestone for Juneyao Air and the whole aviation industry.
  • Enhances flexibility and control in managing onshore and offshore liquidity.
  • Provides a reliable channel to allow moving funds into and out of China.
  • Improves process efficiency for cross-border payments with simplified supporting documentation and lower fees, saving time and labour costs.
  • The syndicated loan is successfully closed at HK$2.3bn with a 27% scaling up compared with the original deal size of HK$1.8bn.
  • Obtained long-term financing at a lower cost of Hibor+160 basis points due to innovatively structuring this as a credit loan backed by a corporate cross-border guarantee.

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