Tuesday 14 August 2018

HNA in talks to sell €2bn stake in Avolon to Japan's Orix

Clare native Dómhnal Slattery, Avalon's chief executive, co-founded the lessor in 2010
Clare native Dómhnal Slattery, Avalon's chief executive, co-founded the lessor in 2010

Manuel Baigorri

HNA, the Chinese conglomerate unwinding a global acquisition spree, is in advanced talks to sell a $2.2bn (€1.9bn) stake in Dublin-headquartered jet lessor Avolon to Japan's Orix Corporation.

Orix has been discussing the purchase of around a 30pc stake in Avolon from HNA's Shenzhen-listed Bohai Capital unit, according to sources.

A deal for the stake in Avolon, which was co-founded by and is headed by Clare native Dómhnal Slattery, could be announced as soon as this week.

No final agreement has been reached, and there's no certainty the negotiations will lead to a deal, it's understood.

Avolon is the world's third-largest aircraft lessor. It was established by Mr Slattery, chief financial officer Andy Cronin and chief commercial officer John Higgins.

They secured more than $7bn in backing from private equity firms and banks, including Cinven and CVC, and Oak Hill Capital Partners to launch the lessor in 2010.

HNA's Bohai Leasing subsidiary completed the acquisition of Avolon in 2016, in a deal that placed a $7.6bn (€6.5bn) enterprise value on the lessor.

Avolon had floated on the New York Stock Exchange just months before Bohai offered to buy it.

HNA has already shed more than $17bn (€14.6bn) of assets this year, reversing a multi-year acquisition spree that saddled it with one of corporate China's biggest debt loads.

The group has spent billions of dollars in recent years buying stakes in businesses such as the Hilton hotel group and Deutsche Bank.

That the conglomerate is looking to sell more aviation assets indicates there is little that HNA considers off-limits in terms of disposals.

HNA has been discussing a range of options for Avolon, and other potential buyers remain interested in the lessor, according to one source. A spokesman for HNA declined to comment.

Firms backed by Hong Kong tycoons Li Ka-shing and Henry Cheng are among suitors that have held talks about buying a stake or some of Avolon's aircraft, it's understood.

Orix's own leasing business, Orix Aviation, is also based in Dublin. It has 230 owned, managed and committed aircraft in its portfolio. Its customers include EasyJet, Etihad and Emirates.

Accounts for Dublin-based Orix Aviation Systems show that it generated an $88.7m (€76.5m) pre-tax profit in the financial year to March 2017.

Avolon tripled in size after acquiring CIT Group's plane-leasing business for more than $10bn in 2017.

Since then, it has been divesting non-core assets, including a portfolio of about 100 airplanes that it gained from CIT, according to Mr Slattery.

The lessor sold 41 aircraft in the second quarter, according to an earnings report this month. Avolon's fleet shrank 3pc to 890 aircraft from a year earlier. The company also holds orders and commitments for 328 planes.

There's been intense interest in the aircraft leasing business from Chinese investors.

Goshawk Aviation, another Dublin-based lessor, agreed during the summer to buy Sky Leasing's Irish subsidiary. That deal created a top 10 global aircraft lessor with a $9.1bn fleet.

Founded in 2013, Goshawk is owned by stock market-listed Hong Kong firm NWS and Chow Tai Fook. The latter is privately owned by the family of the late Hong Kong billionaire Cheng Yu-tung, and is a major shareholder in NWS. (Bloomberg)

Irish Independent

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