Advanced Theory & Practice of Bonds

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1-2 December 2021

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General Electric (GE) announced its $30bn deal with AerCap where the former’s leasing company GECAS would be acquired by the latter. The confirmation comes after WSJ reported earlier this week that a deal was nearing, though the structuring details were not known. As per the latest announcement, GE will receive $24bn in cash plus 111.5mn shares, ~46% equity stake in the combined entity. It will also get an additional $1bn from AerCap in cash or AerCap bonds when the transaction closes. GE said that it plans to reduce debt by ~$30bn after closing, using transaction proceeds and existing cash sources, “to bring total debt reduction since the end of 2018 to more than $70bn.” GE will transfer $34bn of GECAS’ net assets, including its engine leasing and Milestone helicopter leasing businesses to AerCap. Separately, the Board also recommended that shareholders approve a reverse stock split at a ratio of 1-for-8. Moody’s meanwhile affirmed AerCap’s long-term senior unsecured rating at Baa3 with a negative outlook following the announcement while Fitch placed AerCap’s ‘BBB-‘ rating on ‘Watch Negative’ on the GECAS acquisition. Similarly, GE and related ratings were placed on CreditWatch Negative by S&P following the transaction.

GE’s 4.1% Perps were up 0.11 to 90.44, yielding 10.2% and AerCap’s 5.875% 2079s were down 0.4 to 98.98, yielding 6.2%.

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