Article

GE sells off restaurant assets of lending arm in massive 3-way deal

GE Capital U.S. is selling the bulk of its restaurant financing assets, which are worth about $1.4 billion.

June 28, 2016 by S.A. Whitehead — Food Editor, Net World Media Group

GE Capital U.S. is selling the bulk of its restaurant financing assets, which are worth about  $1.4 billion. The first-quarter transaction is expected to release about $0.2 billion of capital to GE when it closes in the third quarter of this year, according to a company press release. 

The agreements stipulate that each buyer will acquire assets based on the location of respective borrowers' regional headquarters. Here's how the assets will be allocated:
•    First Horizon National Corporation in Tennessee acquires assets in the Southwest and Southeast. 
•    Wintrust Financial Corporation in Illinois acquires assets in the Midwest and part of the West. 
•    Sterling National Bank in New York acquires assets in the East. 

The remaining assets will be sold separately, although no details are being disclosed about those transactions. However, two of the players in these transactions, First Horizon's First Tennessee Bank and Sterling National Bank, released some information about their ends of the deal. In a news release, the First Tennessee company said it is significantly expanding its restaurant franchise finance business following the acquisition, which is valued at approximately $637 million in restaurant franchise loans.

The transaction is expected to be immediately accretive to First Horizon’s earnings per share. The release said that the acquired loans will be combined with existing First Tennessee relationships to establish a restaurant franchise finance specialty lending business which will have more than $800 million of outstanding loans after the transaction closes in the third quarter. 

"We already have several commercial bankers who work closely with restaurant franchise customers," said David Popwell, president of banking for First Horizon. "As we build out our new restaurant franchise finance specialty line of business, we will be better able to meet customer needs and court new customers based on the strength of our expanding expertise."

Sterling National Bank, the principal subsidiary of Sterling Bancorp said it will acquire a portfolio with approximately $190 million of performing restaurant franchise financing loans including borrowers who are primarily located in New York, New Jersey, Pennsylvania, and Connecticut.

"The acquisition of this loan portfolio supports the continuation of our strategy to leverage existing infrastructure and expertise within commercial finance," said Sterling's Specialty Finance Division President Tom Geisel. "These relationships will be managed within our Equipment Finance group given the loan structures and client businesses are closely aligned. Executing on our team-based delivery model, we welcome these new relationships and will work to build upon them."

For its part, GE Capital Chairman and CEO Keith Sherin said the deals announced this week represent the last major transactions in a process that started last spring when the industrial giant said it would sell off much of its non-industrial assets to focus more closely on its core business. 

"As we continue to execute on our strategy to sell GE Capital's assets that are not linked to GE, the sale of these restaurant financing assets represents our last major U.S. platform transaction," Sherin said. "We are pleased to reach separate agreements with three strong buyers that will be able to continue to serve our customers and restaurant brands as they continue to grow."

This is part of an earlier announced strategy by GE to concentrate its focus on its high-value industrial businesses. The company is doing this by selling most GE Capital assets but GE will retain financing verticals that relate directly to its industrial businesses. Since that was announced in April 2015, GE Capital has signed agreements for approximately $180 billion and closed on about $156 billion of those. 

In total, GE plans to sell approximately $200 billion of GE Capital businesses worldwide in a process that is expected to be completed by the end of this year. The company plans to deliver about $35 billion of dividends to GE as a result of these actions. 

About S.A. Whitehead

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Pizza Marketplace and QSRweb editor Shelly Whitehead is a former newspaper and TV reporter with an affinity for telling stories about the people and innovative thinking behind great brands.