A number of potential bidders for GE Capital’s sponsored finance business in the US, which includes the popular Antares unit, have emerged.
Apollo Management, Ares Management and Mitsubishi UFJ have signed non-disclosure agreements with General Electric (GE), PE HUB reported on Tuesday (28 April). GE is shedding the bulk of its GE Capital business lines in the hope of ridding itself of its designation as a systemically important financial institution. The report continued on to said that Ares and Macquarie were in discussions to co-operate on a bid. Last week, Bloomberg also reported that SunTrust Bank was considering bidding.
Kohlberg, Kravis Roberts & Co. was another firm linked with a potential US bid by a source speaking to PDI.
Blackstone’s Tony James said during an earnings call that his firm would consider buying parts of GE Capital to combine with their existing credit unit, GSO Capital Partners, while other reports suggest that Wells Fargo is considering a bid for the commercial lending and leasing units.
The US and European leveraged finance businesses are being sold separately, a source close to the situation confirmed to PDI, adding that a wide variety of institutions including banks and funds had expressed interest in the European unit.
The challenge for any debt funds interested in buying GE Capital units will be the much lower cost of capital that the business, as a licensed bank, benefits from. The likely solution will be to bid in consortium with an institutional investor such as an insurance company, the source continued.
The European mid-market lending unit is most likely to be closed and the portfolio sold off, said two sources, noting that most potential buyers would already have credit teams in place and are likely to be interested for the sake of the assets rather than the wider business. Job losses are almost inevitable another source agreed pointing to the staff already let go from the US real estate business, the bulk of the assets of which ($23 billion) were sold to BlackRock and Wells Fargo in a deal announced in tandem with the planned sale. The fired real estate employees were offered one week’s severance for each year of service, the source added.
GE Capital’s mid-market business in Europe includes around €5 billion of the firm’s own lending and around another €1 billion of assets from its unitranche partnership with Ares, the European Senior Secured Loan Programme (ESSLP), a source familiar with the business said.
That partnership, along with its US equivalent and a new €3 billion European Loan Programme focused on senior debt, will continue with the new owner or Ares will seek another partner to step in, another source close to the situation said.
Additional reporting by Anastasia Donde.