US giant GE Capital is to reduce its interest in the Irish-based aircraft leasing group, GPA, the company it rescued from financial ruin in 1993. In a complex deal, GE Capital will receive cash payments and aircraft from GPA to the value of around $100 million (£87.7 million), as part of an agreement that will substantially dilute its association with the Shannon-based company.
Announcing the deal yesterday, GPA chief executive, Mr Patrick Blaney, said the transaction will remove much uncertainty about the future ownership of the group and help it to attract new equity investors.
GPA has so far held discussions with four potential investors, mainly private institutional investors, and expects to talk to at least two more, according to Mr Blaney. The group is hoping to bring at least one, but possibly two, new investors on board, taking up a stake of between 30 to 40 per cent of GPA between them, he said. The deal must however be approved by a 75 per cent majority of its shareholders, who are expected to be asked to consider it in August.
GE Capital never had a shareholding in GPA, but negotiated an option to buy up to 100 per cent of the company for $65 million at any time from 1998 up to 2001, as part of the rescue package to bail out the financially-troubled group. GPA had been keen for GE Capital to make an early decision on whether it intended to exercise that option, claiming it was acting as a constraint on GPA, with uncertainty about its future ownership limiting its ability to raise funds and expand.
Acting on a proposal from GPA, GE Capital has agreed to let its initial option lapse, while replacing it with a new option which entitles it to acquire a "passive" investment of up to 24.9 per cent of the company at the original option price of $0.06 per ordinary share. GPA has undertaken to pay GE Capital Aviation Services company (GECAS) a fee of $61.25 million to terminate its servicing agreement with the group in 2001. It has also agreed to sell nine aircraft to GE Capital at their book value of $274 million and assigned its rights under a purchase agreement to GE to four new Boeing 737 aircraft, subject to reimbursement of instalments already made by GPA.
GE meanwhile has agreed to acquire GPA's financial interest in the outstanding Class E notes issued by its special purpose company, the Airplanes Group, and has an option to pay GPA $36 million relating to 18 aircraft it previously purchased from the company.
GPA will satisfy its obligations as lessee of nine aircraft from GE Capital for a $36 million cash payment and assignment of its rights under any subleases.
Under the agreement, GPA will also have to change its name.
