Flight Risk
General Electric’s US$6.5bn sale of shares in Irish aircraft lessor AerCap via follow-on stock sales alongside concurrent buybacks in March, September and November was a remarkable achievement that contributed to the near doubling of the industrial icon's share price in 2023.
The three jumbo secondaries each priced at successively tighter discounts and incrementally higher prices, as GE disposed of its 46% AerCap stake. The stake was a legacy of the 2021 sale of GE’s leasing unit to NYSE-listed AerCap for around US$30bn in cash and stock.
Goldman Sachs and Citigroup led the syndicate on all three selldowns, using wall-crossing exercises of one or two days on each occasion to help secure multiple times oversubscription while navigating tight funding windows.
The banks "helped us thoughtfully execute the offerings while optimising for market timing, deal size, investor targeting, discount, and overall price", said Jennifer VanBelle, GE’s treasurer.
The full sale of the AerCap stake was another feather in the cap of GE during a busy year in which the slimmed down conglomerate spun off its healthcare division and readied a 2024 spin of its renewable energy/power business, with those achievements reflected in the rising share price.
"[The secondaries] gave AerCap the opportunity to buy back US$2bn of stock over a nine-month period and allowed GE to monetise an asset at progressively higher prices and tighter discounts," said Douglas Adams, Citigroup’s global co-head of equity capital markets.
The March offering, a US$1.4bn upsized stock sale with a two-day wall-crossing, one day of public marketing and a US$500m concurrent share repurchase, priced just ahead of a failed rescue financing by SVB Financial.
AerCap’s September offering, an upsized US$1.7bn overnight priced after a one-day wall cross and alongside a US$1bn stock repurchase, came just a week after the company collected US$645m from an insurance claim covering Russia’s refusal to return jets leased to airline Aeroflot.
The final AerCap selldown in November, a US$1.5bn overnight launched after a day over the wall and with a US$500m buyback, priced a few weeks before the lockup on GE’s stake was due to expire. The banks' willingness to break the lockup early reflected the stock's good performance amid the broader travel rebound and as it began to dawn on investors the Federal Reserve’s aggressive tightening cycle was coming to an end.
"The market was there and the stock was in a good position from the last deal," David Ludwig, Goldman Sachs’ global head of ECM, said of the decision to move ahead with the September sale.
AerCap shares finished the year at US$74.32, well up from the US$65.25 mark of the November sale and the US$58.50 and US$59 levels at which the March and September offerings were struck.
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