Bloomberg
GE sinks if $ 30 billion sale of Jet Lessor does not impress
(Bloomberg) – General Electric Co. sank as investors responded coolly to a much-anticipated $ 30 billion deal to sell its jet-lease business to rival AerCap Holdings NV. The deal creates an aviation finance giant that is partly owned by GE and streamlines the manufacturer’s business model, but the announcement does not go hand in hand with an upward revision of the company’s financial prospects that some on Wall Street had hoped to see. “The expectation was that it would be a catalyst for the upward lead,” Nick said. Heymann, an analyst at William Blair, noted that GE under Culp tended to take the lead only after posting better-than-expected results. The deal is GE’s biggest step so far to break from its difficult recent past, with CEO Larry Culp’s mapping a path to eliminate an in-depth financial unit that goes from jewel in the crown to a blackberry went into the hall. Culp said the deal would “de-risk” GE, in part by reducing debt, but S&P Global Ratings warned of financial threats that could cause a downgrade. The AerCap deal holds potential weaknesses. The conspiracy gives rise to a lessor in the short term who is facing a deep slump in aviation that has encouraged airlines to cancel plane orders, delay deliveries and delay rental payments. The persistent pain for aircraft financiers raises doubts as to whether bigger is better, even because AerCap said the deal would position it to make a profit over time as air travel recovers. ‘Even if an AerCap-Gecas combination improves debt costs, which are essential for more competitiveness, aircraft leasing will still be highly challenged, with companies from Asia gaining influence due to lower capital costs and local influence, “Bloomberg Intelligence analysts George Ferguson and Francois Duflot said in a report.” There is a risk of excess fleet after pandemic. ” With the decline in New York falling 5.4% to $ 13.25 for the biggest drop since September, the stock has more than doubled in the last six months, which was the best performance on the S&P industry index, as Culp’s reversal efforts regained traction by increasing the pandemic, the stock was still trading above its level late last week, before reports of a jet leasing deal with GE Capital Aviation Services, or Gecas.GE, in will incur a non-cash cost of $ 3 billion on the deal in the first quarter, and the company maintained its 2021 financial forecast and forecast adjusted earnings of 15 to 25 cents per share, averaging 26 cents of According to Bloomberg analyst estimates, Gordon Haskett analyst John Inch questioned the timing of the deal, with international air travel and the aviation market still weak, and the $ 3 billion there to connected. ‘one airline rental company in the world (by number of aircraft), why does this transaction not generate a significant profit (multibillion dollars)? “he said the board would recommend a reverse share split at 1-for-8, which Culp said would reduce the number of outstanding shares to a level more in line with companies with a comparable market.” The stock has a had a significant start-up, and on top of that you have a deal that should make the market similar, plus the finish of GE Capital and the realization that it is actually neutral to the net leverage, ”said Deane Dray, analyst at RBC Capital Markets. “But they immediately confirmed that they would reach the 2.5x leverage target again in the next few years.” Trading structure Under the agreement, GE will receive $ 24 billion in cash plus 111.5 million shares, equivalent to 46% according to a statement on Wednesday. GE will receive another $ 1 billion in cash or debt from AerCap at the close of the transaction. “The transformation of GE into a much more focused, simpler and stronger company,” Culp said in an interview, “will give us the opportunity to focus fully on our four industrial enterprises.” The AerCap agreement raises the profile of Aengus Kelly, the landlord’s CEO, who came on the world stage in 2014 with the acquisition of American International Group Group $ 7.6 billion ILFC leasing pioneer AerCap, based in Dublin and listed on the New York Stock Exchange, had a market value of $ 6.6 billion on March 5, before reporting The GE talk. The leasing company said the deal would enable it to take advantage of ‘ a boom in the industry as extensive vaccination campaigns put people flying again after the unprecedented drop in travel demand last year, with the acquisition AerCap would own and manage a portfolio of more than 2,000 aircraft, of which about 60% are narrow aircraft. have an order book of about 500 latest generation jets. ” Obviously we bought the right business at the right price for the right price, ‘Kelly said at a conference. aam with the right partners. ” AerCap’s $ 24 billion commitment from Citigroup Inc. and Goldman Sachs Group Inc. is the second largest loan worldwide so far this year, following Verizon Communications Inc.’s $ 25 billion acquisition last month, according to data compiled by Bloomberg The size of the deal could help increase the issuance of loans worldwide, which had a slump of 42% over a year earlier. after a corporate collapse that wiped out hundreds of billions of dollars in market value, the Boston company plans to use the proceeds of the sale to reduce its debt by about $ 30 billion, for an expected total reduction of more than $ 70 billion since the end of 2018. The agreement is expected to close in nine to twelve months, and Gecas’s more than 400 employees will move to AerCap. which says ‘debt leverage will be higher than previously expected due to the consolidation of GE Capital finances.’ The rating agency said its outlook for GE would be based on the company’s operating performance and expectations for further debt reduction, with GE selling its bio-pharmaceutical business to Culp’s former employer, Danaher Corp., for $ 21 last year. 4 billion. In 2019, the company agreed to sell a $ 3.6 billion aircraft financing business to Apollo Global Management and Athene Holding Ltd. as the troubled manufacturer slashed its once-major lending. The extensive AerCap-Gecas landlord will get negotiation leverage with manufacturers such as Boeing Co. and Airbus SE, and will likely get antitrust inquiries from authorities and stakeholders.The new company could also focus on the strongest airline customers during the recovery of the pandemic, while many will rely on tenants for the financing of flexibility.The implications of the agreement for planners are more genuan hurt as it initially blushed according to Robert Stallard. analyst at Vertical Research Partners. “Airbus and Boeing prefer to have a customer base that is well-funded and stable, as opposed to an abundance of small airlines and leasing customers that cannot survive a downturn like 2020,” Stallard wrote in a note to “AerCap is also the aviation version of a ‘sophisticated investor’, “Stallard said. “We do not see it placing the speculative aircraft orders that some airlines tend to make.” (Updates with analyst comments in third paragraph) Visit us at Bloomberg.com for more articles like this. 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