HNA is said in talks to sell US$2.2 bil Avolon stake to Orix

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(Aug 7): HNA Group Co, the Chinese conglomerate unwinding a global acquisition spree, is in advanced talks to sell a minority stake in jet lessor Avolon Holdings Ltd to Japan’s Orix Corp, people with knowledge of the matter said.

Orix has been discussing the purchase of around a 30% stake in Avolon from HNA’s Shenzhen-listed arm Bohai Capital Holding Co, according to the people. The sale could fetch about US$2.2 billion, the people said, asking not to be identified because the information is private.

A deal could be announced as soon as this week, the people said.

HNA has already shed more than US$17 billion of assets this year, a pace of dealmaking that reverses a multiyear acquisition spree that saddled it with one of corporate China’s biggest debt loads. That the conglomerate is looking to sell more aviation assets — an area it has defined as core — indicates there is little that HNA considers off-limits in terms of disposals.

Shares of Bohai Capital rose 1.9% in Shenzhen trading Tuesday, the most since January, after earlier gaining as much as 2.5%. No final agreements have been reached, and there’s no certainty the negotiations will lead to a deal, the people said.

HNA has been discussing a range of options, and other suitors remain interested in Avolon, according to one of the people. A spokesman for HNA declined to comment, while Orix didn’t immediately reply to an email seeking comment.

Bloomberg News reported last week that HNA has been exploring options for Dublin-based Avolon, which is the world’s third-biggest plane lessor. Firms backed by Hong Kong tycoons Li Ka-shing and Henry Cheng are among suitors that have held talks about buying a stake or some of Avolon’s aircraft, people with knowledge of the matter said at the time.

Avolon, which Bohai Capital bought in 2016, tripled in size after acquiring CIT Group Inc’s plane-leasing business for more than US$10 billion in 2017. 

Since then, it has been divesting non-core assets, including a portfolio of about 100 airplanes that it gained from CIT, Avolon’s chief executive officer,  Domhnal Slattery, told Bloomberg in an interview last month.

The lessor sold 41 aircraft in the second quarter, according to an earnings report this month. Avolon’s fleet shrank 3% to 890 aircraft from a year earlier. The company also holds orders and commitments for 328 planes.