General Electric (GE) finalized its sale of its hotel financing business to Western Alliance (WAL) Monday, thus moving the needle closer to CEO Jeff Immelt's goal of shedding $200 billion of assets tied to GE Capital.
The sale of the assets, which arrange real estate financing for limited-service hotel owners, includes $1.3 billion in "ending net investment," or ENI -- a metric that aggregates the amount of capital GE has put into each finance unit under GE Capital. The sale will also transfer the majority of the business's employees, GE said.
"We continue to make strong progress on closing our previously announced sales as we work to divest the majority of GE Capital assets," GE Capital Keith Sherin said in a statement.
The total closed transactions to date are now approximately $148 billion in ENI, and signed agreements have reached more than $166 billion of the more than $200 billion in ENI that GE Capital plans to sell.
Shedding GE Capital, a central position of Immelt's plan for the company, is the key element of shedding the manufacturer's designation as a "Systemically Important Financial Institution," or SIFI, which essentially brands financial corporations as "too big too fail" in the wake of the 2008 financial crisis.
"Moving forward, SIFI de-designation remains a critical summer/early fall catalyst for GE stock," Barclays analysts said in a Monday investment note. "We admittedly don't know much about the timeline here, as GE is the first company to go through the process (MetLife was recently de-designated, but that was the result of a lawsuit, rather than the formal process GE is pursuing). GE's case seems compelling, if not a lay-up."
Scrapping SIFI has long been viewed as a critical strategy for GE to get out from under a variety of regulations, including leverage tests, debt-incurrence limits and reserve requirements.
GE shares are up roughly 14% since Immelt announced his plans to unwind GE Capital -- which was largely responsible for pulling the manufacturer into the 2008 financial crisis, as well as its comparatively stagnant recovery -- and the general Wall Street consensus on the company is bullish. (About 59% of GE's listed analysts maintain Buy ratings, while none hold Sells, according to Bloomberg data.)