General Electric (GE +2.6%) gains in early trading following a report late Friday that Apollo Global is considering a bid for the company's jet leasing unit, but Wall Street analysts are skeptical of the actual size of a potential deal and its impact on GE's turnaround.
The jet leasing unit could be valued at as much as $40B, according to the report, but J.P. Morgan's Stephen Tusa says the unit could be worth closer to $30B and is unlikely to be the "silver bullet" that some investors might be expecting.
"We remain skeptical on the company’s ability to harvest enough value out of its assets to reduce liabilities, both hard and soft," Tusa writes.
Barclays' Julian Mitchell says while such a deal could reduce some of the existential risks faced by the company, a lasting impact on the equity value would require more clarity on the liabilities at GE Capital; "otherwise, the 'narrative' will remain impaired - i.e. 'good news is really bad news,' in that GE has to sell assets because of a looming major cash claim at [GE] Capital."
Gordon Haskett's John Inch says "while a potential GECAS transaction could be worth $40B, this would only match the book value of GECAS reported assets of just over $40B. Consequently, it is not clear what debt would be assigned to this transaction and what proceeds would be realized."
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