AviLease to buy a ‘very high-quality’ aviation finance unit of Standard Chartered

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Written on Aug 29, 2023

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Standard Chartered has agreed to unload aviation finance for $3.6 billion.
The transaction will enable Standard Chartered to streamline operations.
Shares of Standard Chartered are now up 22% versus their year-to-date low.

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Standard Chartered PLC (LON: STAN) has decided to unload its global aviation finance leasing business to AviLease for a total consideration of about $3.6 billion.

Details of the Standard Chartered – AviLease agreement

AviLease or Aircraft Leasing Company is owned by the Public Investment Fund – a sovereign wealth fund of Saudi Arabia. Its CEO Edward O’Byrne said today in a press release:

We’re purchasing a very high-quality portfolio. The transaction accelerates the scale-up and lessee diversification of our fleet, demonstrating our ability to execute on our investment strategy.

The jet lessor and financier will make an initial payment of $700 million for the said agreement, for which, it has already secured $2.1 billion in funding from Citibank, BNP Paribas, MUFG, and HSBC.

Standard Chartered stock is up nearly 2.0% at writing.

Why is Standard Chartered unloading aviation finance?

Standard Chartered expects the divestment to deliver about a $300 million gain and a 19-bps boost to its CET 1 (common equity tier 1) capital ratio.

It plans on dedicating the net proceeds from this transaction to managing its capital and liquidity position. According to Simon Cooper – Chief Executive of the bank’s business in Europe and Americas:

Sale of aviation finance leasing business allows us to continue to focus our efforts on those areas where we are most differentiated and to further progress our return on tangible equity journey.

Standard Chartered Aviation Finance has a fleet of over 120 aircraft. Its services include debt financing, jet fuel hedging, and remarketing of planes.