Japanese financier ORIX is set to acquire 30% of Irish lessor Avolon from China’s Bohai Capital for $2.2 billion, with completion expected in the fourth quarter of 2018.

Announcing the deal Aug. 8, Avolon said the buy-in from ORIX’s Ireland-based ORIX Aviation Systems subsidiary will provide “a significant credit enhancement,” valuing its overall business at $23.7 billion.

Bohai will remain an Avolon shareholder, albeit with a smaller stake, and the agreement remains subject to approval from Bohai’s largest shareholder, HNA Group. After a wave of rapid global acquisitions, HNA hit liquidity problems and has been selling off assets from its portfolio. Avolon said it has already secured HNA’s “commitment” to the transaction.

ORIX was established in 1964 and has a wide portfolio of business interests, spanning energy, private equity, infrastructure, automotive, shipping, aircraft, real estate and retail financial services. ORIX entered the aircraft-leasing business in 1978 and set up Dublin-headquartered ORIX Aviation in 1991. For the 12 months to March 31, ORIX as a whole reported revenue of $25.6 billion and $2.8 billion net income.

“ORIX is a strong, investment-grade institution with a proven track record in the leasing sector over multiple industry cycles,” Avolon CEO Dómhnal Slattery said. “We will benefit from ORIX’s experience and relationships.”

Specifically, the deal will boost Avolon’s profile in the Japanese financial markets and pave the way for cooperation with ORIX Aviation’s leasing, asset management and trading activities.

As of June 30, Avolon had a portfolio of 890 owned, managed and committed aircraft, while ORIX Aviation owns and manages over 200 aircraft, leased to more than 70 airlines in over 30 countries.

“By virtue of the acquisition of the shares of Avolon, ORIX aims to achieve sustainable long-term growth of its business by way of strengthening its access to the manufacturer order positions that Avolon holds and also further expanding its aircraft-leasing business investment,” ORIX said.

On completion, ORIX will have two seats on the Avolon board, alongside three Bohai directors, Slattery and one independent director.

“Our new shareholder structure and the associated enhancements to our governance framework will also accelerate our momentum towards an investment grade rating—a key objective for our business,” Slattery said.

Currently, approximately 40% of commercial aircraft worldwide are sourced on operating lease, but this is forecasted to increase to almost 50% in the future.

Victoria Moores victoria.moores@informa.com