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Boeing portfolio sale nears completion

/ Source: Financial Times

Boeing Capital Corporation is close to selling its commercial finance portfolio to General Electric for about $2 billion in an effort to refocus on supporting Boeing's core aircraft and defense businesses.

The disposal of the portfolio, which was put up for sale in January, could be completed in the next few days, according to people familiar with the situation.

Boeing is also seeking buyers for its Wichita commercial aircraft manufacturing operations, which could raise more than $1 billion, although a decision is not expected for several months.

Credit Suisse First Boston, the investment bank advising Boeing Capital on the sale, declined to comment.

Boeing Capital, a division of the aircraft manufacturer, declined to comment on the timing of any announcement.

Walt Skowronski, chief executive of Boeing Capital, said in an interview with the Financial Times: "We are looking diligently and hopefully we will have something in the not too distant future."

Addressing the question of how Boeing Capital would spend the proceeds from any eventual sale, Mr Skowronski said: "The money will probably go to a variety of different areas.

"We will owe some taxes to Uncle Sam, and it is likely that some debt will be bought back, and we will use some of it to fund portfolio volume in 2004, which will mitigate the need for external capital market financing.

"There will also be some opportunity to dividend some back to the parent."

In a recent filing with the Securities and Exchange Commission, Boeing Capital said that the portfolio included a wide range of equipment, such as machine tools, marine equipment and oil and gas equipment.

At the end of the first quarter the portfolio was valued at $2.15 billion, compared with $2.25 billion a year ago.

In the late 1990s Boeing Capital was seen as a critical part of Boeing's strategy of diversifying away from the cyclical commercial aviation industry.

In November Boeing announced a change in direction alongside a management shake-up, with the appointment of Mr Skowronski.

It said it would focus on supporting "Boeing's major operating units" and reducing "exposures associated with the current portfolio".

Boeing Capital has been focused on reducing its vulnerability to further problems in the US airline industry, which has been the most severely hit group of global airlines.

About 70 per cent of its $9.9 billion of aircraft assets are currently used by US carriers.

United Airlines, the bankrupt carrier, which is seeking a $1.6 billion federal loan guarantee represents 9.5 percent of its portfolio, or $1.2 billion.