Orix Corporation has confirmed that its Dublin-based aircraft leasing unit, Orix Aviation, will take a 30% stake in Avolon under a $2.2 billion transaction.
Subject to approvals, the Japanese-backed company will acquire 728,288 shares in Avolon from its parent, Bohai Capital, in a transaction scheduled to close in November.
Orix says the main motivations for the acquisition are to strengthen its access to new aircraft through Avolon's orderbook and, more generally, to expand its exposure to the aircraft leasing industry.
"By virtue of the acquisition of the shares of Avolon, Orix aims to achieve sustainable long-term growth of its business by way of strengthening its access to the manufacturer order positions that Avolon holds and also further expanding its aircraft leasing business investment universe," it adds.
Flight Fleets Analyzer shows that Avolon manages a fleet of 563 aircraft and has a further 309 on order, while Orix manages 235 aircraft but has none on order.
FlightGlobal's latest portfolio tracker shows that, based on portfolio value, Avolon is the fourth-largest aircraft lessor in the world, while Orix Aviation is 14th.
A separate stock-exchange disclosure from Bohai shows that the deal will terminate automatically if it is not completed by 31 December, unless agreed otherwise by the two parties.
It also notes that all the equity that two of its subsidiaries hold in Avolon is pledged against a $1.86 billion loan from Bank of China, of which the principal balance was $167 million at the end of March. Thus, the transaction will require the bank to agree to an early repayment of that loan.
Confirmation of the sale comes less than a week after reports surfaced that Bohai's controlling shareholder, HNA Group, was seeking to sell a minority interest in Avolon as part of its efforts to realise cash from its assets to cover looming debt repayments.
Avolon itself was acquired in January 2016 by Bohai, and merged with Hong Kong Aviation Capital. In October that year, it reached an agreement to buy CIT Group's aircraft leasing unit in a $10 billion all-cash transaction.