WAL can ‘comfortably manage’ $1.4bn GE hotel finance biz: KBRA

Kroll Bond Rating Agency (KBRA) believes Western Alliance Bank can “comfortably manage” the hotel financing business it has agreed to purchase for $1.4 billion from GE Capital.

Kroll Bond Rating Agency (KBRA) believes Western Alliance Bank can “comfortably manage” the hotel financing business it has agreed to purchase for $1.4 billion from GE Capital. 

The rating agency issued a statement noting that the subsidiary of Western Alliance Bancorporation has “strong expertise in CRE and hotel lending,” positioning it well to handle GE’s former Franchise Finance US, which provides real estate financing to owners of limited service hotel properties.

“The scope of the deal is believed by KBRA to be comfortably manageable in the context of WAL’s balance sheet and funding capabilities,” the agency wrote, noting that that the transaction has a no impact on WAL’s ratings. “Liquidity and regulatory capital ratios are expected to be largely unchanged post portfolio acquisition, due to strong deposit growth and capital generation rates.”

GE announced that it had reached the agreement to sell the business earlier this week. The sale includes approximately $1.4 billion in ending net investment (ENI) and the majority of the hotel business employees. The company reached a separate agreement to sell its Canadian Franchise Finance business, including most employees, to a different buyer, representing about $0.3 billion in ENI. Both transactions are expected to close in the second quarter of 2016.

“Combined with the sale of our Canadian Franchise business, this represents a significant portion of Franchise Finance, our last North American business to be sold as part of our plan to significantly reduce the size of GE Capital,” said Keith Sherin, GE Capital chairman and CEO, in a statement.

GE announced in April of 2015 that it would sell most of its GE Capital assets and focus on its industrial businesses by the end of 2016. So far the company has signed agreements for approximately $161 billion and has closed $138 billion of the $200 billion total it plans to sell worldwide.

In June of 2015, KBRA assigned a senior unsecured debt rating of BBB+, subordinated debt rating of BBB and short-term rating of K2 for WAL. In addition, KBRA assigned a deposit rating of A-, senior unsecured debt rating of A-, subordinated debt rating of BBB+, and short-term debt and deposit ratings of K2 for the lead subsidiary, Western Alliance Bank.

“The outlook on all long-term ratings is stable.”

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