Avolon raising record $8.5bn to fund CIT buyout
Dublin-headquartered aircraft lessor Avolon is raising a record $8.5bn (€8bn) to help fund the $10bn acquisition of the aircraft leasing business of CIT Group.
Avolon has priced a $3bn bond offering, which combined with a new $5.5bn secured term loan it finalised to complete the CIT transaction, will make for the largest financing transaction ever undertaken in Irish corporate history, it's believed.
It's also understood that the offering has been significantly over-subscribed by investors keen to bankroll the CIT acquisition.
It's thought that the term loan was oversubscribed by double the amount sought, and that Avolon bonds have been oversubscribed by a factor of four. That means the company could have borrowed as much as $24bn (€22.4bn).
Avolon, now owned by China-based HNA's Bohai aircraft leasing unit, sealed a deal last October to buy CIT's assets, a transaction that will see it effectively double in size.
Avolon, which was co-founded by Clare native Domhnal Slattery, currently has an owned, managed and on-order fleet of 429 aircraft.
Following the CIT acquisition, it will have about 910. It will also propel Avolon to being the world's third-largest aircraft lessor.
When Avolon clinched the deal to buy CIT last October, Mr Slattery told the Irish Independent that he now plans to make Avolon the world's biggest aircraft-leasing firm.
A wholly-owned subsidiary of Avolon is raising $1.75bn of 5.25pc senior notes due in 2022, and $1.25bn of 5.5pc senior notes due in 2024. The offering is expected to close on February 3. Those interest rates, or coupons, are lower than what analysts had expected Avolon to pay. It's thought that investors believe Avolon will soon be rated an investment-grade business.
Avolon is rated Ba3 by agency Moody's. The ratings agency also reckons Avolon's debt-to-EBITDA (earnings before interest, tax, depreciation and amortisation) ratio will be around 2.5 times once the CIT acquisition is finalised. That means that Avolon's debt levels remain relatively low.
Avolon confirmed that it intends to use the net proceeds from the offering, together with cash on hand, about $2.4bn of new equity contributed by Avolon's indirect parent company, Bohai, and the new senior secured term loan, to finance the CIT acquisition.
Mr Slattery co-founded Avolon in 2010, securing $7bn (€6.5bn) in private equity backing.
The company floated on the New York Stock Exchange in 2014 but was sold to Bohai just months later. Pre-tax profits at Avolon hit $111.6m (€105m) in 2015, versus a $28.8m loss in 2014, as revenue rose 25pc to $677.2m.