Starwood, Apollo Vie for $4 Billion GE Air-Finance Unit

(Bloomberg) -- Starwood Capital Group and Apollo Global Management have submitted offers to buy an aircraft-financing business owned by General Electric Co., which could fetch around $4 billion, according to people familiar with the matter.

GE is working with advisers as it explores a possible sale of PK AirFinance, a subsidiary of the conglomerate’s broader aircraft-leasing business known as GECAS, said the people, who asked not to be identified because the talks are private. GE has received interest from potential suitors, some of which -- including affiliates of Starwood and Apollo -- have advanced into the next round of bidding, the people said.

Representatives for GE and Apollo declined to comment, while Starwood didn’t immediately respond.

A sale would accelerate the dismantling of GE’s finance unit 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.

Apollo, which is seeking $1 billion for a new aircraft-finance fund, had previously expressed interest in GE’s jet-leasing assets. Bloomberg reported in January that the firm had talked to bankers about lining up debt to buy all or part of GECAS, which could be worth as much as $40 billion.

A foray by Starwood into aircraft leasing would follow its December hire of a former Deutsche Bank executive to run its transportation, infrastructure and energy lending business.

PK AirFinance specializes in loans secured by commercial aircraft, engines and helicopters. It has exposure to more than 320 aircraft and over 50 engines across the globe, with a larger focus on Asia, Europe and the Middle East and Africa.

Airline Borrowers

Recent deals completed by the low-profile division include $343.2 million in secured financing for Indonesia’s Lion Air in March 2018. PK AirFinance also arranged 186.3 million euros ($207.8 million) in term financing for Turkish Airlines in December 2016, according to a brochure on the company’s website, which shows the business’s cumulative origination loans reached $37 billion in 2018.

PK AirFinance 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.

The potential sale comes weeks after the departure of PK AirFinance’s president, Paul Meijers. The executive this month joined Airbus SE, according to his LinkedIn profile.

Culp, who took over the top job at GE in October with a mandate to reduce risk in the finance business and sell non-core assets, has acknowledged the company has received external interest in the business, but said he didn’t intend to sell GECAS. In a January interview, Culp said he wouldn’t rule anything out, but called aircraft leasing “an important part of our company.”

To contact the reporters on this story: Gillian Tan in New York at gtan129@bloomberg.net;Richard Clough in New York at rclough9@bloomberg.net

To contact the editors responsible for this story: Alan Goldstein at agoldstein5@bloomberg.net, Susan Warren

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