ROYAL BANK of Scotland last night agreed to sell its Dublin-based aircraft leasing business to Sumitomo Mitsui Banking Corporation of Japan for $7.3 billion (€5.8 billion). The deal, which is subject to regulatory approvals, would be the biggest ever sale of an aircraft leasing business in the world.
Sources close to RBS Aviation Capital said the sale secures the 69 jobs based in Dublin with the likelihood of new positions being created as the business grows under its new owners.
The sale is part of UK bank RBS’s divestment of non-core assets, which has been undertaken to deleverage the business and bolster its balance sheet. Sumitomo appears to have beaten off heavyweight competition in the form of state-owned China Development Bank Corporation and US bank Wells Fargo.
The sum being paid, before the assumption of external indebtedness and working capital liabilities, is expected to be about $7.3 billion. It is payable in cash on completion of the relevant transfer agreements, subject to certain post-closing adjustments. Regulatory approvals are expected to be received by the end of the third quarter this year.
Future order commitments of $3.7 billion transfer with the Dublin-based business. The risk weighted assets associated with the Aviation Capital business are $2.5 billion.
Peter Barrett, chief executive of RBS Aviation Capital, said he was “pleased” that the business was sold to Sumitomo in its “entirety”.
“Our aim throughout the sale process was to attract a bidder with firm plans to help us grow our already strong platform and in Sumitomo we have found that.”
Mr Barrett and the other members of the Dublin-based management team will transfer with the business.
RBS said the proceeds from the sale would “further strengthen” its Core Tier 1 capital position and would be used to “reduce wholesale funding requirements and fund ongoing lending”.
Commenting on the transaction, RBS group finance director Bruce Van Saun said: “Reaching agreement on a deal of this scale in such a volatile market is a significant success for our non-core division and a credit to SMBC. This transaction further evidences our progress in reducing our non-core portfolio and returning the group to a position of strength.”
RBS Aviation Capital is a fully integrated aircraft leasing company established by Irish businessman Domhnail Slattery in 2001. Mr Slattery sold the business to RBS and now runs a rival company from Dublin called Avolon, which poached senior staff from RBS after it was formed in 2010.
RBS Aviation Capital is the world’s fourth largest aircraft lessor by owned and managed fleet value. The business has been profitable since inception. It has 69 staff in Dublin and eight in other locations in Europe, the US and Asia.
It owns 206 aircraft and has commitments to purchase a further 87 by 2015.
As of June 30th, 2011, RBS Aviation Capital had gross assets of $7.2 billion.