KKR-Led Consortium Bags GE Capital’s ANZ Operations

KKR-Led Consortium Bags GE Capital’s ANZ Operations
By General Electric Company (w:File:General_Electric_logo.svg) [Public domain], via Wikimedia Commons

GE Capital, the financing arm of General Electric, has sold its Australia and New Zealand loans business for an enterprise value of $6.3 billion (A$8.2 billion) to a consortium led by KKR. The latest deal is the biggest private equity sale in Australia since the global financial crisis.

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GE Capital deal for an enterprise value of A$8.2 billion

The consortium led by KKR includes Varde Partners and Deutsche Bank. A representative said Sunday that they will acquire GE Capital’s Australian and New Zealand consumer lending arm, marking Australia’s biggest inbound takeover of a finance company.

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The consortium agreed to acquire the unit for an enterprise value of A$8.2 billion, including the company’s existing debt, which will now be securitized. Citing knowledgeable sources, Reuters reports that the group is looking to securitize about A$7 billion of debt which they acquired from a unit of GE.

The proposed A$7 billion securitization by the consortium will be led by the Commonwealth Bank of Australia, National Australia Bank and Westpac. The latest deal is expected to boost Australia’s securitization market, driven by demand for high-yielding assets.

According to Thomson Reuters data, so far in 2015, over A$10.5 billion of asset-backed securities have already been issued, almost double the volume a year earlier. The Australia’s securitization market is on track to match the A$45 billion to A$55 billion of asset-backed securities issued annually between 2005 and 2007.

The GE Capital acquisition bests other deals

GE Capital’s consumer finance business in Australia and New Zealand has over 3 million customers. It offers personal loans and credit cards, plus interest-free financing for products sold by local retail partners, including housewares and electrical goods retailer Harvey Norman.

The latest deal, however, will ensure GE Capital retains its commercial finance unit, which offers loans and leasing to midsize businesses in Australia and New Zealand. The consortium led by KKR bested several other suitors, including three separate groups involving TPG, Apollo Global Management LLC and Macquarie Group Ltd.

Though GE Capital had been one of the most profitable units of General Electric, thanks to its exposure to commercial loans and risky home loans, it was hit hard during the financial crisis. In recent years, General Electric has pruned its GE Capital arm and has shed businesses that are outside its core industrial and health care operations.

As reported by ValueWalk last November, the U.S. Federal Reserve had its eye on General Electric Capital which may require the non-bank financial company to submit to the same Fed regulatory regime as that of other large banks. The need to regulate GE Capital, which primarily makes loans to businesses, was necessitated by “the substantial similarity of [GE Capital’s] activities and risk profile to that of a similarly-sized bank holding company.

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Mani is a Senior Financial Consultant. He has worked in Senior Management role in large banking, financial and information technology organizations. He has provided solutions for major banking and securities firms across the globe in the area of retail, corporate and investment banking. He holds MBA (Finance) and Professional Management Accounting Qualifications. His hobbies are tracking global financial developments and watching sports
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