General Electric Co. agreed to sell its corporate aircraft financing portfolio to Global Jet Capital, a lender established last year by Blackstone Group to enter the private plane market, as Chief Executive Officer Jeffrey Immelt works to shrink the company’s lending arm.
The transaction has a value of $2.5 billion in ending net investment, a balance-sheet gauge that excludes non-interest- bearing liabilities and cash, GE said Monday. With the deal, GE’s announced divestitures by that measure have reached $97 billion this year. As Immelt refines GE’s focus on industrial properties, Nelson Peltz’s Trian Fund Management LP is taking advantage of the streamlining of the business to acquire a $2.5 billion stake, the companies announced Monday.
The aircraft financing accord helps reduce GE Capital’s exposure to aerospace cycles while broadening Global Jet’s access to a market that Honeywell International Inc. estimated last year will expand by 9,450 jets in the next decade. The portfolio includes loans and leases as well as more than 300 aircraft across the United States, Canada, Mexico and Latin America, which sell for an average of $25 million to $75 million, GE and Global Jet Capital said in separate statements.
“GE made the decision a couple of years ago to dismantle the business, but the lending environment still exists,” Rolland Vincent, president of aircraft consultant Rolland Vincent Associates in Plano, Texas, said in a telephone interview. “A lot of jet users are interested in leases, but banks are constrained in what they can offer. So we see a tremendous opportunity for non-bank lenders. People do not necessarily want to own their assets.”
Global Jet Capital, which began operations last year, is funded by three global investment firms — AE Industrial Partners, Carlyle Group and GSO Capital Partners, a Blackstone company in partnership with Franklin Square Capital Partners.
“This is a remarkable portfolio of corporate aviation assets,” Shawn Vick, Executive Director of Global Jet Capital, said in a statement. The investment “underlines our confidence in the long-term growth prospects of the large cabin, long-range private jet market. Corporate users and high net worth individuals will seek competitive financing solutions rather than allocate their own cash resources which are better invested in their own businesses.”
Closing of the deal will probably take place “in stages” over the next several months, Global Jet Capital said. The company was advised by Deutsche Bank, BofA Merrill Lynch and Citigroup together with Latham & Watkins, Clifford Chance US and Kirkland & Ellis as legal advisors. JPMorgan Chase, and Shearman & Sterling advised GE.