Connected Transactions Provision of Entrusted Loan
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AIR CHINA LIMITED
(a joint stock limited company incorporated in the People's Republic of China with limited liability)
(Stock Code: 00753)
CONNECTED TRANSACTIONS
PROVISION OF ENTRUSTED LOAN
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The Board of Air China Limited (the "Company") announces that on 12 October 2011, the Company entered into the Entrustment Agreement with CNAF and the Entrusted Loan Agreement with CNAF and Air China Cargo, respectively, in relation to the provision of the Entrusted Loan by the Company to Air China Cargo with CNAF acting as the lending agent.
As at the date of this announcement, Air China Cargo is a connected person of the Company by virtue of being a non-wholly owned subsidiary of the Company in which Cathay Pacific, a substantial shareholder of the Company, holds more than 10% of the voting rights. The provision of the Entrusted Loan by the Company to Air China Cargo under the Entrusted Loan Agreement accordingly constitutes a connected transaction of the Company under Chapter 14A of the Listing Rules.
As each of the applicable percentage ratios (as defined in Rule 14.07 of the Listing Rules) for the principal amount of the Entrusted Loan, on an aggregated basis, is more than 0.1% but less than 5%, the Entrusted Loan Agreement is only subject to reporting and announcement requirements but is exempted from independent shareholders' approval requirements under Chapter 14A of the Listing Rules. |
Background
On 12 October 2011, the Company entered into the Entrustment Agreement with CNAF and the Entrusted Loan Agreement with CNAF and Air China Cargo, respectively, in relation to the provision of the Entrusted Loan to Air China Cargo. Pursuant to the Entrusted Loan Agreement, CNAF is designated by the Company to act as a lending agent to release the Entrusted Loan, which is funded by the Company, to Air China Cargo and to monitor the use and repayment of the Entrusted Loan by Air China Cargo. The proceeds of the Entrusted Loan is to be used to supplement the working capital of Air China Cargo. Pursuant to the Entrustment Agreement, CNAF has agreed to provide the service as a lending agent in relation to the release of the Entrusted Loan, which falls within the financial services under the Financial Services Agreement. Please refer to the announcement of the Company dated 27 October 2009 for details of the Financial Services Agreement.
The Entrusted Loan Agreement
Date
12 October 2011
Parties
(1) the Company, as the lender, the principal business activity of which is air passenger, air cargo and airline-related services;
(2) CNAF, as the lending agent; and
(3) Air China Cargo, as the borrower
Major Terms of the Entrusted Loan Agreement
Principal amount
RMB1.5 billion
Structure and term
The Entrusted Loan is to be drawn down in tranches, and the principal amount of each tranch shall be repayable in full within 6 months.
Interest rate
The interest rate is arrived at after arm's length negotiation between the Company and Air China Cargo. The interest rate for each tranche of the Entrusted Loan shall be 10% less than the benchmark lending interest rate announced by the People's Bank of China on the date of the actual drawdown of such tranche, and shall remain unchanged during the term of such tranche for a period of six months.
Fees
The Company will pay CNAF a fee at an annualised rate of 0.075% of the principal amount of each tranche. The Company shall pay the respective fees upon the drawdown of each tranche.
Reasons for The Entrusted Loan Agreement
The Entrusted Loan is provided with a view to satisfying Air China Cargo's working capital requirement, which will also optimise the cash use efficiency of the Group. The Directors are of the view that the provision of the Entrusted Loan to Air China Cargo through CNAF will help monitor Air China Cargo's use of the proceeds from the loan and due repayment.
The terms of the Entrusted Loan Agreement were negotiated on an arm's length basis between all parties thereto and were determined on normal commercial terms. The Directors believe that the terms of the Entrusted Loan Agreement are fair and reasonable and in the interests of the Company and its shareholders as a whole.
The following Directors had abstained from voting on the relevant Board resolutions passed to approve the provision of the Entrusted Loan: Mr. Kong Dong (director of Cathay Pacific), Mr. Christopher Dale Pratt (director of Cathay Pacific), Mr. Ian Sai Cheung Shiu (director of Cathay Pacific), Mr. Cai Jianjiang (director of Cathay Pacific) and Mr. Fan Cheng (director of Air China Cargo and Cathay Pacific). Save as disclosed in this announcement, none of the Directors had any material interest in the transactions contemplated under the provisions of the Entrusted Loan and none of the Directors abstained or was required to abstain from voting on the relevant Board resolutions passed to approve the provision of such Entrusted Loan.
Information Relating to The Counterparties
CNAF is owned as to 75.54% by CNAHC and 19.31% by the Company. Pursuant to the Financial Services Agreement, CNAF has agreed to provide the Company with a range of financial services including, among others, the entrusted loan service under the Entrustment Agreement.
Air China Cargo, a company with limited liability incorporated in the PRC and a subsidiary of the Company, is primarily engaged in the operation of cargo airline services. The shareholders of Air China Cargo are the Company, Fine Star Enterprises Corporation and Cathay Pacific China Cargo Holdings Limited with a shareholding of 51%, 24% and 25%, respectively.
Implication under The Listing Rules
As at the date of this announcement, Air China Cargo is a connected person of the Company by virtue of being a non-wholly owned subsidiary of the Company in which Cathay Pacific, a substantial shareholder of the Company, holds more than 10% of the voting rights. The provision of the Entrusted Loan by the Company to Air China Cargo under the Entrusted Loan Agreement accordingly constitutes a connected transaction of the Company under Chapter 14A of the Listing Rules.
As each of the applicable percentage ratios (as defined in Rule 14.07 of the Listing Rules) for the principal amount of the Entrusted Loan, on an aggregated basis, is more than 0.1% but less than 5%, the Entrusted Loan Agreement is only subject to reporting and announcement requirements but is exempted from independent shareholders' approval requirements set out under Chapter 14A of the Listing Rules.
As at the date of this announcement, CNAF is a connected person of the Company by virtue of being the a 75.54% held subsidiary of CNAHC, the controlling shareholder of the Company. The provision of the service by CNAF in relation to an entrusted loan funded by the Company under the Entrustment Agreement accordingly constitutes a connected transaction for the Company under Chapter 14A of the Listing Rules. For details of the connected transactions between the Company and CNAF, please refer to the announcement of the Company dated 27 October 2009.
DEFINITIONS
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"Air China Cargo" |
Air China Cargo Co., Ltd. |
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"Board" |
the board of Directors |
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"Cathay Pacific" |
Cathay Pacific Airways Limited |
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"CNAF" |
China National Aviation Finance Co., Ltd. |
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"CNAHC" |
China National Aviation Holdings Company |
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"Company" |
Air China Limited (中國國際航空股份有限公司), a joint stock limited company incorporated in the PRC with limited liability |
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"connected person" |
has the meaning ascribed to it under the Listing Rules |
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"Directors" |
the directors of the Company |
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"Entrusted Loan" |
the loan of a principal amount of up to RMB1.5 billion entrusted by the Company to be provided to Air China Cargo through the Entrusted Loan Agreement, in which CNAF acts as the lending agent |
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"Entrusted Loan Agreement" |
the entrusted loan framework agreement dated 12 October 2011 and entered into between the Company, CNAF and Air China Cargo |
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"Entrustment Agreement" |
the entrustment agreement in relation to the Entrusted Loan dated 12 October 2011 and entered into between the Company and CNAF. The entrusted loan service provided therein falls into the financial services under the Financial Services Agreement |
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"Financial Services Agreement" |
the financial services agreement dated 27 October 2009 and entered into between the Company and CNAF |
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"Group" |
the Company and its subsidiaries |
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"Listing Rules" |
the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited |
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"PRC" |
The People's Republic of China |
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"RMB" |
Renminbi, the lawful currency of the PRC |
By Order of the Board
Air China Limited
Huang Bin Tam Shuit Mui
Joint Company Secretaries
Beijing, the PRC, 12 October 2011
As at the date of this announcement, the directors of the Company are Mr. Kong Dong, Ms. Wang Yinxiang, Mr. Cao Jianxiong, Mr. Sun Yude, Mr. Christopher Dale Pratt, Mr. Ian Sai Cheung Shiu, Mr. Cai Jianjiang, Mr. Fan Cheng, Mr. Fu Yang*, Mr. Li Shuang*, Mr. Han Fangming* and Mr. Yang Yuzhong*.
* Independent non-executive Director of the Company
This information is provided by RNS
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