General Electric Co.'s finance unit has bankrolled Penske TruckLeasing Co. for more than 15 years. That's about to change.

The joint venture between GE Capital Corp. and companiescontrolled by Roger Penske, a member of GE's board, plans torefinance $6.4 billion of borrowings over the next two years. A$700 million offering last month of unsecured bonds due in June2019, used to finance an equity infusion, was the first step,according to a statement this week.

After relying solely on GE Capital for financing since 1996,Penske Truck hired JPMorgan Chase & Co. to arrange a $1 billionloan and plans to tap the corporate bond market as borrowing costsreach record lows. The transactions come as GE Capital shrinksassets after $32 billion of credit losses in the aftermath ofLehman Brothers Holdings Inc.'s 2008 collapse.

“This is setting up Penske to be an independent borrower downthe line without GE's support,” said Hitin Anand, an analyst atCreditSights Inc. in New York. “It's good from the standpoint ofwhat GE's doing for its own shareholders.”

Randolph Ryerson, a spokesman for Reading, Pennsylvania-basedPenske, declined to comment beyond the statement.

GE Capital and LJ VP Holdings LLC, an entity formed earlier thismonth as part of a reorganization of the joint venture, jointlyissued the 3.8 percent, senior unsecured bonds. GE Capital has theoption to take over responsibility for making payments on the debtstarting next year, according to the prospectus.

Refinancing Transaction

Proceeds from the offering will be used to finance an equityinjection by LJ VP into Penske Truck Leasing, the companies said.The leasing company will use that money to repay borrowings from GECapital, Penske said in the statement.

“This is essentially a refinancing transaction, and itstrengthens Penske Truck Leasing by allowing them to take advantageof a strong market and attractive interest rates to raisethird-party debt,” Russell Wilkerson, a spokesman for Stamford,Connecticut-based GE Capital, said in an e-mail.

Moody's Investors Service gave the debt a rank of Baa3, one stepabove junk, and Standard & Poor's gave Penske Truck Leasing acorporate rating of BBB-, also one level higher than junk. TheApril 25 bond sale was designed to help Penske Truck Leasing obtaininvestment-grade credit ratings, the company said in theprospectus.

“These strong credit ratings will allow us to consideradditional diversified sources of capital in the financialmarkets,” Brian Hard, chief executive officer of Penske TruckLeasing, said in the statement.

Repaying GE Capital

The venture may also turn to asset-backed debt secured by itsvehicles and leases as it seeks to “repay in full our debt to GECapital as soon as reasonably practicable,” it said in theprospectus. It plans to end borrowing under its loan agreement withGE Capital.

Founded in 1969, Penske Truck Leasing manages a fleet of about209,700 trucks, tractors and trailers, according to the prospectus.Leasing, rentals and maintenance accounted for 79 percent of thecompany's $3.83 billion of operating revenue last year, with itslogistics operation providing the rest.

GE Capital has cut its ownership share of Penske Truck Leasingto 49.9 percent from 79 percent in 2006, according to theprospectus. The stake was valued at $889 million as of Dec. 31, thecompany said in its annual report. Penske Corp. and PenskeAutomotive own the remaining 50.1 percent.

GE Capital and Penske amended the agreement governing the jointventure to allow either company to require it to pursue an initialpublic offering any time after Dec. 31, 2017, according to theprospectus. They also extended the term of the partnership until2023, according to the statement.

Penske Truck Leasing earned $238.9 million in profit last yearwhile paying $233.5 million in interest on its borrowings, it saidin the prospectus. It distributed half its 2011 net income to itsowners last month.

Roger Penske, CEO of Penske Corp. and Penske Automotive GroupInc., has been a member of GE's board since 1994. He was re-electedat GE's annual meeting last week, backed by 87 percent of votingshares.

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