By Rishav Chatterjee
(Reuters) -Standard Chartered said on Monday it was selling its global aviation finance leasing business to Saudi Arabia-based AviLease for about $3.6 billion, as part of a drive to streamline its operations.
AviLease will pay an initial consideration of $700 million and is also funding repayment of $2.9 billion of net intra-group financing from the StanChart group, bringing the total consideration to about $3.6 billion.
The deal comes at a time when the bank is focussing on business areas where it stands out from competitors as it strives to deliver 2024 targets.
Riyadh-headquartered AviLease, also known as Aircraft Leasing Co, is a jet lessor owned by Saudi Arabia’s sovereign wealth fund.
StanChart said in January it was exploring options for its global aviation finance business.
Dublin-based Standard Chartered Aviation Finance owns and manages more than 120 aircraft and offers services including jet fuel hedging, debt financing and remarketing of unneeded planes.
“The sale of our Aviation Finance leasing allows us to continue to focus our efforts on those areas where we are most differentiated,” Simon Cooper, CEO of Corporate, Commercial & Institutional Banking and Europe & Americas at Standard Chartered, said on Monday.
The company expects to record a gain of around $300 million from the sale and its common equity tier 1 capital ratio would increase by around 19 basis points.
StanChart’s aviation financing business was ranked as the 21st biggest lessor based on the $3.7 billion market value of its fleet in publisher Airfinance Journal’s 2022 rankings.
AviLease is among the few companies that the Saudi Public Investment Fund (PIF) has endorsed as it grows deeper into various sectors.
AviLease Chairman Fahad Al-Saif said: “The acquisition will propel AviLease and will in turn support Saudi Arabia’s aviation ecosystem.”
The global aircraft leasing business is facing challenges from inflation and rising borrowing costs even as aviation demand rebounds.
The sector has gone through major consolidation in recent years, with private equity firms jumping in to buy smaller lessors and large players bulking up.
PIF is setting up startup carrier Riyadh Air to predominantly serve the kingdom’s capital, which has ambitions to become a global business hub.
($1 = 3.7514 riyals)
(Reporting by Rishav Chatterjee in Bengaluru; Editing by Shounak Dasgupta and Mark Potter)