- Transaction has value of $2.5 billion in ending net investment
- Deal brings GE's total divestitures to $97 billion this year
A luxury-jet lender backed by Blackstone Group LP is expanding its year-old foray into plane financing after purchasing a portfolio from General Electric Co.
Global Jet Capital will more than double in size and plans further expansion through hiring following the agreement to acquire the GE loans, leases and planes, Executive Director Shawn Vick said Monday. The deal is valued at about $2.5 billion of net assets and includes more than 300 aircraft across the U.S., Canada, Mexico and Latin America, which sell for an average of $25 million to $75 million, according to statements by GE and Global Jet Capital.
“This enables us to get to scale very quickly, at a cost of capital that is competitive,” Vick said in an interview. “We believe the existing portfolio plus the new aircraft deliveries will generate significant market opportunities for growth.”
The accord will broaden Global Jet’s access to a market that Honeywell International Inc. estimated last year will expand by 9,450 jets in the next decade, while helping reduce GE Capital’s exposure to aerospace cycles. The Boca Raton, Florida-based lender 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.
About $10 billion to $12 billion of new business jets are delivered globally each year, “and the vast majority of those are going to require financing,” Vick said. “Whether you’re a large corporate entity or an ultra-high net worth individual, you have better things to do with your money than putting it into an aircraft.”
Global Jet Capital’s team of 12 employees will expand with the addition of 15 current GE staff once the transaction closes, Vick said. The company will also seek to recruit about 10 "origination professionals" in the next few months, he said.
Monday’s deal takes GE’s announced divestitures in ending net investment -- a balance-sheet gauge that excludes non-interest-bearing liabilities and cash -- to $97 billion as Chief Executive Officer Jeffrey Immelt refines the company’s focus on industrial properties.
“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.”
Blackstone shares jumped 6 percent to $33.39 at the close in New York while GE rose 5.3 percent, the most since April 10, to $26.82. Separately, Nelson Peltz’s Trian Fund Management LP said it acquired a $2.5 billion stake in GE.
Having already underwritten Gulfstream 650 and Bombardier Challenger 350 aircraft in its first year of existence, Global Jet Capital has “a number of opportunities that we’re looking at and will close before year-end,” Vick said. He declined to specify the current size of the company’s lease and loan portfolio.
Global Jet Capital’s main shareholders “have all the capability in the world to support the business on any other additional portfolio acquisitions that would be sensible,” Vick also said. “We would be interested in continuing to grow the business through acquisitions. If the circumstances are right, we’re open to that.”
The deal will probably close “in stages” over the next several months, Global Jet Capital said. The company was advised by Deutsche Bank AG, BofA Merrill Lynch and Citigroup Inc. together with Latham & Watkins LLP, Clifford Chance US LLP and Kirkland & Ellis LLP as legal advisers. JPMorgan Chase & Co., and Shearman & Sterling LLP advised GE.