Latest news with #Jeppesen
Mint
22-05-2025
- Business
- Mint
Private Equitys Big Guns Are Tearing Up the Rules on Leverage
(Bloomberg) -- As one of the world's largest sovereign wealth funds warned this week that private equity is 'very troubled' right now, a spate of recent buyout deals in Europe and the US points to a possible route out of the mire: The deep shift in how much debt this industry uses to fund its takeovers. KKR & Co. has been busily dealmaking despite the gloom around President Donald Trump's tariff upheavals, snapping up a couple of Swedish health specialists in the process. Fellow private equity firm Thoma Bravo, meanwhile, has pulled together one of the year's biggest buyouts with the $10.6 billion purchase of Boeing Co.'s Jeppesen navigation unit and other assets. Like KKR's offers for Karo Healthcare and life sciences company Biotage AB, the Jeppesen deal shows how private equity is targeting higher-quality assets as it looks to put investors' money to profitable use. But they've something else in common, too: Buyers are stumping up most of the finance themselves, with debt taking up a smaller share than was once the norm. For a private equity industry that's often pilloried for piling debt onto the companies it buys — or leveraging them up, in finance speak — this is part of a big shift. Back in the not-so-distant heyday of PE, it wasn't unheard of for buyouts to include 70% of borrowed funding. Even 80% was doable when money was dirt cheap and firms took full advantage to juice their returns. Since the turn of the decade, and as interest rates have spiked, the proportion of debt on many buyouts has reduced to more digestible levels as cash got more expensive. In recent weeks, a swath of deals shows how far the pendulum is swinging, with equity outweighing borrowed money in multiple cases. The Biotage deal includes a slug of debt that's worth only 20% or so of the 11.6 billion kronor ($1.2 billion) deal value, according to a person with knowledge of the matter. The Karo purchase involves a much bigger €1.1 billion ($1.25 billion) chunk of borrowing, but that's less than the equity check. Elsewhere in Europe, Cinven agreed to buy nutrition specialist Nutrisens, with just a third of it expected to be debt funded, a person familiar said. Spokespeople for KKR and Cinven declined to comment. Thoma Bravo's Jeppesen acquisition, meanwhile, is being backed with a $4 billion loan led by private lenders Apollo Global Management Inc. and Blackstone Inc. A KKR publication last year said overall in PE, debt as a percentage of total capital structures had fallen from about 60% to nearer 35%. The cause today isn't just buyers taking fright at pricey debt. Investors in PE funds, known as limited partners, want firms to put more of their money to work in an M&A market that's been pretty moribund for a while, several market participants say — and they're willing to sacrifice returns to do this. More important is that this is evidence of private equity firms willing to stake larger shares when bidding for higher quality companies with solid cash flows, especially at a time of maximum market turmoil. Premium valuations on these businesses also limit the proportion of debt that can be raised without exceeding acceptable leverage ratios, a measure of debt over earnings. The industry has also struggled to exit many businesses bought at the top of the PE bull market at the turn of the decade, and is wary of repeating errors. 'The sifting process around diligence on potential targets has intensified given the risk factors that are currently at play,' says Jeremy Duffy, a partner at law firm White & Case. 'High quality, non-cyclical and less exposed to tariffs are all high on the private equity playbook.' The spate of deals involving large slugs of equity also has an impact on the banks and private credit firms who are fiercely competing to put their cash to work by backing buyouts — the first group via debt shared out between a large syndicate of lenders and the latter via direct loans often involving only one or a handful of creditor funds. Private lenders including Apollo and Blackstone won the deal to back the Boeing unit sale at some of the tightest pricing private credit is seeing, with an interest rate of 4.75 percentage points over the benchmark. Thoma Bravo had an option to go with a financing package that included preferred equity, according to a person with knowledge, which would have cut the equity contribution. It decided not to. A spokesperson for the firm declined to comment. The rebound in markets since Trump relented on some of his initial tariff barrage makes the rivalry to lend on buyout deals more intense, as Wall Street returns to a riskier type of lending that's one of its chief money spinners. The private equity industry's caution about dealmaking and loading too much borrowing onto companies at too high a cost will only be reinforced by the economic backdrop. Moody's Ratings stripped the US of its top credit rating last week, as fears grow about the country's indebtedness, Trump's tariff ructions and the weaker dollar. JPMorgan Chase & Co. boss Jamie Dimon warned this week against market complacency, arguing that 'the people who haven't been through a major downturn are missing the point about what can happen in credit.' For now, PE's buying and improving of solid businesses may start to be preferred to financial engineering, at least for some. Debt investors might even find reasons for comfort in having large equity checks supporting their assets. 'We've seen assets with great growth and great cash flow price at a premium level,' says Daniel Rudnicki Schlumberger, JPMorgan's head of leveraged finance for EMEA. 'Sponsor returns are sometimes less driven by debt' and 'more by growth.' --With assistance from Davide Scigliuzzo. (Updates with detail on debt investors getting comfort from larger equity checks in penultimate paragraph.) More stories like this are available on
Forbes
21-05-2025
- Business
- Forbes
A Very Good Month For Boeing
Sign with logo at entrance to office of aerospace company Boeing. (Photo by Smith ... More Collection/Gado/Getty Images) The past several weeks have been a welcome change for Boeing, which has struggled for the past seven years with fatal crashes, a pandemic travel shutdown, quality and safety incidents halting production and a labor strike that pushed the company to the brink. However, after nine months on the job, CEO Kelly Ortberg's recovery plan is showing strong progress. On April 22, Boeing announced the sale of Jeppesen, which provides digital navigation services, for $10.55 Billion to private equity firm Thoma Bravo. The move was part of a plan by Ortberg to divest 'non-core' assets. Jeppesen is the premier provider of navigation charts and aids to airlines, business jets, military aircraft and general aviation and was expected to prompt a heated auction, which it did. The unit had many attributes which make prospective buyers salivate - steady cash flow driven by subscription revenue, strong reputation, a highly diversified customer base and a near monopoly position in the market. Thoma Bravo, which specializes in software driven entities, will have pricing power to juice returns over time. Private equity firms TPG, Veritas and Advent International were all reported to have bid for the unit which went on the block at the end of last year. In the end, the price was far above expectations of approximately $6 Billion penciling out in the end at 16 times 2025 earnings before interest, taxes, depreciation and amortization. It is estimated that the proceeds will reduce Boeing's net debt by 14% improving the company's balance sheet, Boeing bought the unit for $1.5 Billion in 2000 and was able to maintain its market neutrality even with airlines which flew Airbus or aircraft from competing OEM's. A Boeing 787 Dreamliner belonging to XiamenAir takes off from Sydney's Kingsford Smith Airport on ... More May 12, 2020 in Sydney, Australia. Then on May 12, China authorized resumption of Boeing aircraft deliveries that had been held hostage in the tariff wars amid scaling back of the China specific tariffs of 145%. Through the remainder of the year 50 aircraft are slated for delivery to China worth approximately $1 Billion. China has over 500 Boeing aircraft still on order, representing approximately 10% of Boeing's backlog. Meanwhile, Boeing's production of aircraft continues to build. In April, Boeing delivered aircraft at roughly twice the rate of a year ago (30 737's versus 16 in 2024, 8 787's versus 4 in 2024). May continues to show similar progress. Boeing has a near term goal of 38 737'a per month at which point the FAA will assess whether production can move to higher rates. The 737 is crucial to Boeing's recovery as a rate increase to those levels begins to produce positive cash flow. ABU DHABI, UNITED ARAB EMIRATES - MAY 15: U.S. President Donald J. Trump meets with UAE President ... More Sheikh Mohamed bin Zayed Al Nahyan during a visit to Qasr al Watan (Palace of the Nation) on May 15, 2025, in Abu Dhabi, United Arab Emirates. Trump is on the third day of his visit to the Gulf to underscore the strategic partnership between the United States and regional allies including the UAE, focusing on security and economic collaboration. (Photo by) Then Trump's trip to the mid East produced record orders from Qatar, United Arab Emirates and Saudi Arabia. For a President fixated on restoring manufacturing jobs and bolstering the economy, aerospace is a critical component to US balance of trade and high value added manufacturing. After the roller coaster of tariff pronouncements, the deals provided a needed boost to backlog and confidence. As part of the $1.2 Trillion deal between the US and Qatar, Qatar Airways ordered 210 aircraft (130 787's, 30 777-9's and an additional 50 options of the two types). It was the largest ever widebody order from a single operator and was the airline's largest order in history. These were in addition to 197 Boeing aircraft it already had on order. Etihad Airways, based in the UAE, ordered 28 787's and 777X's. Up until now, Etihad has maintained a relatively even mixed fleet of 105 aircraft split between Boeing and Airbus. This order will push them to be more oriented to Boeing if Airbus does not score a similar order. AviLease, an aircraft lessor based in Saudi Arabia, placed its first order from Boeing. Unlike Qatar and Etihad, this order was all for the narrowbody 737 MAX 8 and 10, which are in high demand and more easily placed in airline fleets. The order was part of a $60 Billion deal by the Saudis to invest in the United States. Despite this progress, Boeing still faces many challenges including regulatory approval for the 737 MAX 7 and 10 and the 777X. United, one of the earliest customers for the MAX 10 may shift its orders for the aircraft to other variants amid expected delivery delays of up to two years. Nevertheless, Boeing looks forward to continued progress with other non-core assets being sold in the near future and completion of the re-acquisition of Spirit AeroSystems in the third quarter of this year. Although the mid-East deals are unlikely to be repeated in the future, the tailwinds that have begun over the past month bode well for the country's largest exporter.
Yahoo
23-04-2025
- Business
- Yahoo
Private Credit Just Crushed Wall Street--$4B Loan Fuels Thoma Bravo's $10.6B Boeing Buyout
Private credit just scored another power play. Thoma Bravo is buying Boeings (NYSE:BA) flight navigation unitincluding Jeppesen, ForeFlight, and other digital assetsfor $10.6 billion, and its not turning to Wall Street banks for help. Instead, a $4 billion loan is coming from private lenders led by Apollo Global Management and Blackstone. The seven-year financing carries a spread of 4.75% over benchmark rates and was structured as a unitranche. Apollo, the administrative agent, has been on this for a while, even offering pre-agreed staple financing as part of its private credit partnership with Citigroup. Warning! GuruFocus has detected 9 Warning Signs with KKR. The lender lineup reads like a who's who of alternative credit: Ares, KKR (NYSE:KKR), Blue Owl, and JPMorgans (NYSE:JPM) private credit arm are all in. While the final structure could still shift, one things cleardirect lenders are now writing checks the size of small IPOs. And Citigroup? Its playing middlemanadvising Boeing on the sale while sourcing deals for Apollo in their $25 billion partnership. Citi brings in the deals. Apollo brings the money. Simple. Effective. Disruptive. This isnt just a big buyoutits a signal. Private capital is no longer just an alternative; its becoming the primary route for mega deals. With traditional banks sidelined by regulation and public markets still wobbly, institutional money is stepping in fast, light, and fully loaded. For investors, its a shift worth watching. Because when the biggest names in credit are underwriting the future of M&A, the rules of the game arent just changingtheyve already changed. This article first appeared on GuruFocus. Sign in to access your portfolio
Axios
23-04-2025
- Business
- Axios
Behind the scenes of Boeing's big tech sale
Boeing early last year was at yet another low point, after it was revealed that part of an Alaska Airlines plane had blown off mid-flight because of missing bolts. That incident may have been the genesis of Boeing's decision to sell most of its digital aviation business to private equity firm Thoma Bravo for $10.55 billion, which was announced Tuesday. Behind the scenes: Axios has learned that Thoma Bravo soon after sent a letter to Boeing's CEO and CFO, with whom it had existing relationships, suggesting ways that the debt-laden company could raise capital. One idea was to sell off profitable tech assets that Boeing had acquired in 2000 (Jeppesen) and 2019 (ForeFlight). By Q4, Boeing had hired banks and launched an auction. Zoom in: There were around three dozen bidders in the initial round, including both financial sponsors and strategics. That got whittled to fewer than 10 bidders in the second round, and then down to four — each of which either was a standalone PE firm or PE consortium. Final bids were due Monday. Boeing picked Thoma Bravo, which in turn chose private credit over syndicated loans. The big picture: What's remarkable about the process is that the price is said to have climbed at each stage, despite tariff tumult that's impacted other large mergers and been particularly tough on airlines. Delta, for example, recently pulled its 2025 guidance, while United issued two different sets — depending on if the U.S. does or doesn't enter a recession. The buyside thesis seems to be that the number of "tails" will keep climbing, even if travel suffers a near-term decline, and that those new planes will require the sort of tech that Boeing is offloading. Particularly as flight automation accelerates. Part of this confidence is based on historical growth trends, and part on documented order backlogs. Plus, private equity has longstanding affinity for carveouts from legacy OEMs like Boeing. State of play: Boeing shares rose more than 6% at Wednesday's open, on better-than-expected earnings.
RTÉ News
23-04-2025
- Business
- RTÉ News
Boeing posts smaller quarterly loss on higher jet deliveries
Boeing reported a smaller-than-expected quarterly loss today, as the US planemaker produced and delivered more jets, after a quality crisis and crippling strike shuttered production of most of its aircraft in late 2024. Boeing has been delivering more planes and wants to boost output of its strong-selling 737 MAX jets to 38 a month in 2025, after production slumped last year due to a series of crises and a strike by about 30,000 US West coast factory workers. Shares of the Dow component rose 4% in premarket trading, as the company said 737 production gradually increased in the quarter and it is still expected to reach 38 units per month by the end of the year. But the planemaker faces pressures from supply-chain snags that have delayed production and dented its ability to cater to a booming aerospace market. It reported an $11.8-billion loss for 2024 due to problems at its major units. Boeing is also dealing with the fallout of a US-China trade war that led to the return of two of its planes destined for a Chinese carrier. The planemaker is working to chart a recovery path under new CEO Kelly Ortberg, who is taking steps to streamline operations and strengthen its balance sheet. On Tuesday, Boeing announced the sale of portions of its Digital Aviation Solutions business, including navigation unit Jeppesen, for $10.55 billion, as part of a plan by Ortberg to reduce debt by selling off non-core assets. In a letter to employees on Wednesday, Ortberg referred to 2025 as Boeing's "turnaround year", citing higher first-quarter deliveries and product improvements. "We're building higher quality airplanes and delivering them with more predictability," he said in the letter. Free cash flow usage, a metric closely watched by investors, during the quarter improved to negative $2.3 billion, compared with negative $3.9 billion a year ago. Boeing CFO had said in March that the cash flow could improve in the first quarter by "hundreds of millions" of dollars. The planemaker reported an adjusted loss of 49 cents per share during the first quarter, compared with analysts' average expectations of $1.29, according to data compiled by LSEG. Its revenue increased 18% to $19.5 billion in the quarter through March, marginally above Wall Street expectations of $19.45 billion.
