International banking group Standard Chartered signed agreements for the sale of its global aviation finance leasing business for an initial total cash consideration of $700 million to AviLease, an aircraft leasing company owned by the Public Investment Fund, Saudi Arabia’s sovereign wealth fund.
The transaction is being completed through sale of shares in relevant subsidiaries and minority equity interests held by the Standard Chartered Group. The consideration is subject to adjustment with reference to the net asset value of the business at completion. The consideration (and its adjustment) has been determined after “arm’s length” negotiations as part of a competitive process.
This transaction follows Standard Chartered’s statement in January that it intended to explore alternatives for the future ownership of its global aviation finance business. The sale is expected to complete toward the end of 2023.
Headquartered in Riyadh, Saudi Arabia, AviLease launched in 2022 and offers leasing, trading and asset management services.
“The sale of our aviation finance leasing business allows us to continue focusing our efforts on those areas where we are most differentiated and make further progress on our return on tangible equity journey,” Simon Cooper, CEO of corporate, commercial & institutional banking in Europe and the Americas at Standard Chartered, said. “I want to thank our aviation finance colleagues, whose commitment to building an outstanding franchise over more than 15 years has enabled the success of this transaction.”
Standard Chartered’s aviation finance business owns and manages a fleet portfolio of more than 120 aircraft on lease to more than 30 airlines. In 2022, the business recorded a profit before tax of $18.2 million, a profit after tax of $15.6 million, gross assets of $3.8 billion and a net asset value of $300 million.
The transaction includes the sale of 100% shareholding in each of Pembroke Group Limited (Isle of Man), Pembroke Aircraft Leasing Holdings Limited (Ireland) and Pembroke Aircraft Leasing (Tianjin) Limited (China). Upon completion of the sale, these companies will no longer be subsidiaries of Standard Chartered.
AviLease is also funding the repayment of approximately $2.9 billion of net intra-group financing from Standard Chartered. This financing is subject to adjustment with reference to the amount due at completion.
On completion of the transaction, Standard Chartered will record an estimated gain of approximately $300 million and an increase in common equity Tier 1 capital ratio of around 19 bps. Standard Chartered expects to include the net proceeds from the transaction within the overall management of the capital and liquidity position of the company and its subsidiaries.
The agreements are subject to customary closing conditions, which remain to be satisfied as at the date of this announcement. Standard Chartered continues to be supported by J.P. Morgan Securities as its financial advisor.
In a separate transaction, PK Airfinance, an aviation lending platform backed by Apollo, agreed to acquire the majority of an approximately $920 million portfolio of secured aviation loans from Standard Chartered, with Apollo affiliates agreeing to purchase the balance of the portfolio.
