Wednesday 1 March 2017

Avolon's $500m deposit to buy CIT

John Mulligan

John Mulligan

Domhnal Slattery, chief executive officer of Avolon
Domhnal Slattery, chief executive officer of Avolon
Domhnal Slattery

Dublin-based aircraft leasing firm Avolon has paid a $500m deposit to secure its acquisition of the jet-leasing business of CIT Group.

Dublin-based aircraft leasing firm Avolon has paid a $500m deposit to secure its acquisition of the jet-leasing business of CIT Group.

The $10bn in total transaction will be completed in the first quarter of 2017 and will propel Avolon to being the third biggest aircraft lessor in the world, with a total fleet of 910 operational and on-order aircraft.

In an exclusive interview with the Irish Independent, Avolon chief executive Domhnal Slattery, inset, said the group now aims to become the world's biggest aircraft lessor, overtaking rivals Gecas and AerCap.

Gecas, the world's biggest aircraft lessor, currently has a fleet of just under 2,000 aircraft, including 1,700 fixed-wing jets and 250 rotary aircraft.

Avolon has secured committed debt facilities of $8.5bn to finalise the CIT deal, and saw off competition from rivals such as Century Tokyo Leasing and the leasing arm of China's Ping An Insurance.

Mr Slattery co-founded Avolon in 2010, securing $7bn in private equity backing. The company floated on the New York Stock Exchange in 2014 and was sold to China's Bohai Leasing in 2015. Bohai is part of China's HNA conglomerate.

Mr Slattery said he believed CIT got a fair price for its business. "I think this has been a win-win transaction for both sides," he said, speaking from New York. "CIT have got a very fair price for their business.

"They've got a premium relative to their own book value. We think about the metal value of an airplane. While we think about price earning and price to book, they're accounting analyses. We look at what the aircraft are actually worth. We've actually bought this business at a slight discount to the fair value of the aircraft fleet. That feels like a good place to be."

He said price wasn't the only issue. "It was very stiff competition. But when you get into these large-scale transactions, price clearly is very important, but I think the board of CIT was very comforted by our track record in executing large deals."

Avolon has paid a $500m deposit for the transaction. "That's the largest deposit that's ever been paid for a corporate transaction of this size," he said, adding that it was a signal of intent. "Our aspiration is to be the largest aircraft leasing company in the world, in terms of size, shape and scale.

"I thought we'd get into the top three within five years of doing the Bohai deal. We did it in nine months. So, who knows? We'll see where the opportunities lie."

Irish Independent

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