More insurance company liquidity could be channelled into aircraft debt following a move by KKR, which has an investment platform with operating lessor Altavair, to acquire all of the outstanding shares of Global Atlantic.
Global Atlantic is a privately-held life insurance company and also the parent company of Infinity Transportation, an operating lessor across a range of asset classes including rail, aviation and intermodal equipment with full-service capabilities.
KKR says the purchase represents a "significant and natural extension" of its existing insurance business, which includes managing $26 billion of assets on behalf of insurance companies.
Joseph Bae and Scott Nuttall, co-presidents and co-chief operating officers of KKR, said: "This transaction is highly strategic for KKR — it meaningfully expands our base of permanent capital, further diversifies and scales our business, and significantly grows our position within the insurance industry, which has been increasing its exposure to alternative investment strategies."
Neither Altavair nor KKR was available for comment at press time.
Insurance money poured into the aviation loan market last year. In December 2019, Apollo Global Management completed the purchase of the PK Airfinance platform while its life insurance affiliate, Athene, acquired PK's portfolio of loans, adding to the private equity firm's already strategic aircraft leasing investment in Merx Aviation. The deal marked the first time an insurer had purchased an aviation lending platform.
The sale by GECAS attracted nearly 15 bidders from a mix of suitors including large Asian banks, Middle East debt funds, US insurance companies and private equity firms.
In May, KKR and Altavair entered into a sale and leaseback deal with Delta Air Lines for six Airbus A321 aircraft with 2018 and 2019 build years. Altitude Aircraft Leasing, which was established by KKR's credit and infrastructure funds in 2018 to acquire aircraft to be serviced by Altavair, acquired the Delta units.
In February, KKR and Altavair agreed to purchase 38 Airbus A330 and Boeing 777 widebody aircraft from Etihad Airways through their investment platform.
The $1 billion aircraft portfolio includes Etihad Airways' owned fleet of 777-300ERs and Rolls-Royce Trent-powered A330-300s and A330-200s.
KKR's purchase of Global Atlantic is expected to close in early 2021 and is subject to required regulatory approvals.
KKR will pay Global Atlantic shareholders an amount equal to 1.0x Global Atlantic's book value as of the date of closing, subject to an equity roll-over for certain existing shareholders.
As of 31 March, Global Atlantic's book value was approximately $4.4 billion. KKR expects to fund the acquisition, net of equity roll-over participation, from a combination of cash on hand, proceeds from potential minority co-investors and the issuance of new debt or equity.
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