Orix swoops for $2.2bn Avolon stake

Japanese financial services group Orix has struck a $2.2 billion (€1.9 billion) deal to buy a 30 per cent stake in Dublin-based aircraft lessor Avolon from Bohai Capital, part of China's HNA group.

Ratings agencies Fitch and Moody's have signalled they would upgrade Avolon on the back of the deal, which is likely to cut the Irish group's borrowing charges.

Avolon, which is now the third largest lessor in the world, had been denied a top tier rating because of the HNA’s financial problems.

As part of the deal, Bohai will keep 70 per cent of Avolon, but its parent will use the $2.2 billion to pay down debt. Two Orix directors will also come on to Avolon’s seven-person board.

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Growing demand

Led by Irish chief executive David Power, Orix Aviation has $10 billion (€8.7 billion) of aircraft under management.

The purchase increases its stake in the $280 billion (€245 billion) global aircraft leasing market, where demand is growing, supported by a rise in low-cost carriers and passenger traffic.

The agreed deal will allow Orix Aviation Systems, a fully-owned unit of Orix, to gain part control of Avolon, which has 562 aircraft, nearly three times more than Orix. Avolon also has a 300-plus aircraft on order with Boeing and Airbus.

“The addition of Orix, an investment grade institution, diversifies and strengthens the financial profile of Avolon’s shareholder base and facilitates positive credit rating momentum,” Avolon said.

“Additionally, the new governance structure enhances protections for minority shareholder and debt investors,” it added.