General Electric Co. agreed to sell an aircraft-financing business to Apollo Global Management LLC and Athene Holding Ltd. as the ailing manufacturer slims down its once-vast lending arm.
Apollo will acquire PK AirFinance, a subsidiary of GE’s broader aircraft-leasing business known as Gecas, while Athene will buy a related portfolio of loans, the companies said Thursday in a statement. The deal is expected to close in the fourth quarter.
While financial terms of the deal weren’t disclosed, the companies said that $3.6 billion of PK AirFinance’s financing receivables would be sold above book value. Bloomberg News reported last month that Apollo and Starwood Capital Group were among the bidders for the unit, in a deal that could fetch around $4 billion.
The sale accelerates the dismantling of GE’s finance operation as Chief Executive Officer Larry Culp reorients the company around equipment manufacturing. GE has been moving away from lending since the 2008 financial crisis, though it has resisted selling its aircraft-leasing assets.
“This sale is aligned to GE Capital’s overall strategy to become smaller and simpler, and our commitment to reduce our assets by $10 billion in 2019 is now more than halfway complete,” GE Capital CEO Alec Burger said in the statement. The company continues to focus on reducing its debt-to-equity ratio, he said.
GE shares rose 2.3% to $8.13 at 12:28 p.m. in New York. The stock had climbed 9.1% this year through Wednesday, having dropped sharply in the past two weeks after accounting investigator Harry Markopolos accused the company of fraud. GE denied the allegation. The S&P 500 Index has advanced 15% this year.
Apollo, which has sought $1 billion for a new aircraft-finance fund, had previously expressed interest in GE’s jet-leasing assets. Culp has said he doesn’t intend to sell all of GE Capital Aviation Services, which is one of the world’s largest plane-leasing companies.
PK AirFinance specializes in loans secured by commercial aircraft, engines and helicopters. It has exposure to more than 320 planes and more than 50 engines across the globe, with a principal focus on Asia, Europe, the Middle East and Africa. The company’s investment employees will move to Apollo.
The operation traces its roots to 1979, when it was established by a Swedish bank that dubbed the business, PK-Banken. In 1988, the company was renamed Crédit Lyonnais/PK Airfinance after the French lender acquired a majority stake. GE bought the unit in 2000.
By Richard Clough