Sankaty to buy GE's Australia, NZ commercial lending portfolio

Financial terms were not disclosed, but according to local media reports, the deal is worth around A$1.9 billion ($1.4 billion). The portfolio has in excess of A$2 billion of exposure across debtor finance, corporation aviation finance, leveraged finance, equipment finance and asset-backed lending. There are over 500 borrowers. Deutsche Bank is serving as co-investor, financier and advisor.

This is Sankaty's third portfolio transaction of this nature in Asia Pacific working with Deutsche Bank. "This investment is a strong reflection of Sankaty's deep capabilities in the portfolio acquisition space and demonstrates our role as a trusted partner to financial institutions seeking solutions," Mitchell Stack, managing director and head of the firm's Melbourne office, said in a statement.

Sankaty's significant break in the region came with the acquisition of J.P. Morgan's Global Special Opportunities Group last year at a valuation of $1.3 billion. This included a substantial portfolio of loans and special situations investments in Australia and across Asia. Before that, the firm paid more than $300 million for a portfolio of performing and stressed corporate loans from Lloyds in Australia.

This year in Australia, Sankaty has recapitalized mining services company Imdex, and provided mezzanine finance to the private equity-backed acquisitions of VIP Pet Foods, Affinity Education and the acquisition of GE's consumer finance business. The latter transaction saw KKR, Värde Partners and Deutsche Bank buy GE Capital's consumer lending unit in Australia and New Zealand for an enterprise valuation of A$8.2 billion.

General Electric (GE) has been divesting consumer finance assets as it looks to focus on industrial businesses, with a view to reducing the financial services share of revenues to 25% from 42% last year. In the past eight months it has signed agreements to sell four Australia and New Zealand-based consumer and commercial financing businesses.

GE plans to retain financing businesses that relate directly to its core industrial capabilities. Agreements are now in place that will see approximately $128 billion of GE Capital offloaded, more than 60% of the overall target. This recent transaction alone will contribute approximately $100 million to the $35 billion of dividends expected to be paid to GE under the divestment plan, according to a statement.

Founded in 1998, Sankaty manages more than $26 billion in assets, investing up and down the capital structure in leveraged loans, high-yield bonds, distressed and stressed debt, mezzanine debt, structured products and equities.

Ashurst and Herbert Smith Freehills served as legal counsel to Sankaty and Deutsche Bank. Morgan Stanley advised on the sale and King Wood Mallesons and Minter Ellison provided legal counsel to GE.

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• Topics
• Buyouts
• Credit/Special Situations
• Australasia
• Sankaty Advisors
• Structured finance
• Distress
• Australia
• New Zealand