Kevin O'Toole/LONDON

GPA could re-emerge from the shadow of GE Capital, with plans to buy out of the agreements signed five years ago when the US finance giant stepped in to rescue the Irish leasing company from near collapse.

A memorandum of understanding has been agreed between the two companies which essentially would allow GPA to emerge as a renamed, small independent lessor. The group says that it is in talks with new potential investors to allow it to fulfil its limited ambition of becoming a niche player.

Under the original $1.4 billion deal of 1993, GE Capital took a raft of aircraft off the GPA books in return for receiving an option to acquire the leasing company at any time over the following seven years through to October 2001.The finance group also took over management of the leased aircraft fleet through GE Capital Aviation Services(GECAS). GPA was left to manage the liabilities of its cut-down aircraft portfolio.

Now GPA has assembled a complex deal to buy itself out of the tie-ups. GE Capital's option to acquire the company is reduced to an option to take a 24.9%stake, with additional rights to buy into an aircraft securitisation package.

GPA will also renegotiate the GECAS contract with early termination in 2001 for a fee of $61 million, as well as paying an additional $36 million to buy out finance leases on 18 aircraft. Finally, GE Capital will take over nine aircraft - worth some $274 million - together with GPA's future delivery positions, understood to cover four new Boeing 737s.

The agreement has been greeted with cautious optimism by leading rating agency Standard and Poor's. The agency says that it will leave GPA smaller, but with greatly reduced liabilities and free cash of around $300 million.

At its height, GPA had control of a fleet of 460 aircraft and a forward orderbook for almost 200. The pieces began to unravel with GPA's abortive international flotation, launched at the depth of the recession in 1992, which left the group fighting for survival as banks withdrew their support.

The bulk of the fleet has since been taken off the group's balance sheets through a series of sales and securitisation deals. The core of GPA's business will be based around 80 aircraft, primarily Airbus A320s and Boeing 737s.

Source: Flight International