Popular Stories

GE Sells Air Leasing Unit, Bringing In More Than $30 Billion

GE has reduced debt by about $75 billion since the end of 2018.

Sebastien Bozon/AFP via Getty Images

General Electric’s huge sale of its aircraft-leasing unit, called GECAS, is complete, delivering more than $30 billion of cash and assets the company can use to keep paying down debt and restructuring its operations.

GE (ticker: GE) is receiving about $24 billion in cash, $1 billion in debt instruments, and a 46% stake in the aircraft lessor AerCap (AER), which bought the business. It’s another step in simplifying GE’s operations that will make the company more complicated to understand for a little while.

GE stock was up about 0.5% in premarket trading, roughly the same as the move in U.S. stock-index futures. S&P 500 futures were up 0.4%, while futures on the Dow Jones Industrial Average gained 0.5%.

The stock move isn’t bigger because everyone knew the news was coming. The sale was announced in March and GE management said they were on the verge of closing the deal this past week.

Still, what the deal symbolized is impressive. With the sale, GE has reduced debt by about $75 billion since the end of 2018. At the end of the third quarter, GE had roughly $19 billion in debt attached to its industrial operations and $44 billion in debt attached to GE Capital.

The closing of the deal also means that GE’s lending arm, GE Capital, which once had more than $600 billion in assets, won’t be a separately reported business segment anymore. GE, essentially, is back to being an engineering organization.

That will complicate things, a little, while investors get used to GE’s lending operations being reported as part of industrial operations. But no one said turning around GE’s operations would be easy, or simple.

“Completing this strategic transaction is a significant milestone in GE’s transformation to a more focused, simpler, stronger high-tech industrial company,” said CEO Larry Culp in the company’s news release. “This is a debt story today….And it is an equity story longer term, substantially simplifying GE to its industrial core.”

The remaining businesses at GE Capital are energy services and long-term-care insurance liabilities, according to William Blair analyst Nicholas Heymann. He thinks GE will sell or offload the insurance contracts, further simplifying itself and reducing the volatility of its earnings. The long-term care contracts have been a source of pain for investors as the company has taken charges to shore up reserves in recent years.

GE stock has had a good year as the company continues its transformation. Coming into Monday, shares were up about 21% year to date, in line with the comparable gains of the S&P 500.

Write to Al Root at [email protected]

View Article Origin Here

Related Articles

Back to top button