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Business deals

Aircraft leasing offers new course for Mizuho and Marubeni

Megabank teams up with trading house to cultivate China and Southeast Asia

San Francisco-based Jackson Square Aviation, a full-service aircraft leasing company, was acquired by Mitsubishi UFJ Lease & Finance in 2013. Japanese banking groups are expanding their aircraft lease operations.

TOKYO -- Japanese megabank Mizuho Financial Group and major trading house Marubeni are joining forces in the leasing business, eyeing opportunities in places like China and Southeast Asia.

The pair sees growth potential in leasing aircraft, renewable energy equipment and vehicles for car sharing, particularly in emerging economies where incomes are rising.

They argue the combination of Marubeni's extensive overseas network and Mizuho's experience with credit screening will give them an advantage.

Japanese financial companies have been beefing up their overseas aircraft leasing businesses in recent years to shore up revenues as they struggle to make money under ultralow interest rates. Mizuho had been notably behind in its foray into leasing.

A consortium between Sumitomo Mitsui Financial Group and Sumitomo Corp. bought the Royal Bank of Scotland's aircraft leasing operations for about $7.2 billion in 2012. Mitsubishi UFJ Lease & Finance acquired major U.S. player Jackson Square Aviation for roughly $1.3 billion in 2013, while Tokyo Century took a 20% stake in Aviation Capital Group of the U.S. in 2017 for about 67 billion yen ($595 million).

The market for commercial aircraft is projected to expand thanks to a growing middle class in Asia and the rise of budget airlines. In particular, demand for aircraft leases is growing among carriers seeking flexibility in launching new routes and drawing up flight schedules.

Mizuho and Marubeni want to meet overseas demand for aircraft, renewable energy equipment and cars.

Plans call for Mizuho to raise its 3.8% stake in IBJ Leasing, an affiliate, to over 20% by buying new shares through a private placement. IBJ Leasing would then invest in MG Leasing, a Marubeni subsidiary, making it equally owned by IBJ Leasing and Marubeni.

They intend to prioritize businesses with high profitability, including aircraft leasing.

IBJ, which does business mainly in Japan, appears to have limited experience retrieving leased assets from clients once contracts expire and selling them on the secondhand market. It does, however, offer solid funding and know-how in assessing leasing opportunities.

That appealed to Marubeni, which brings its own leasing experience to the table, having operated a financial leasing business in Japan and abroad in addition to its involvement with MG.

In the U.S., Marubeni has a number of companies operating aircraft, automobile and trailer leasing. The trading house aims to use the new alliance to expand in China and Southeast Asia, as well as the U.S.

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