Saturday 18 November 2017

Avolon on track to seal $10bn CIT air deal within fortnight

Avolon's Dómhnall Slattery
Avolon's Dómhnall Slattery
John Mulligan

John Mulligan

Dublin-based aircraft leasing company Avolon hopes to finalise its $10bn (€9.3bn) acquisition of CIT's leasing business within the next two weeks.

CIT said that Avolon's parent company, China's Bohai, has informed it that Bohai shareholders have approved the deal and that it is now awaiting Chinese regulatory approvals.

The acquisition will propel Avolon to being the world's third-largest aircraft lessor after GECAS and AerCap.

Releasing its annual report, CIT confirmed that the closing of the transaction with Avolon, which was acquired by Bohai Leasing last year in a deal with a $7.6bn enterprise value, remains on track for the end of the month.

Bohai is part of China's HNA conglomerate, which is led by billionaire Cheng Feng.

"We continue to target closing by the end of the first quarter of 2017," according to CIT.

"In March 2017, Bohai has advised us that they received approval of Bohai shareholders to complete the transaction," it added.

A key remaining milestone for closing includes receipt of Chinese regulatory approvals. Bohai has advised us that they continue to work toward achieving the milestone by the end of the first quarter."

Avolon emerged as the successful bidder for CIT's leasing assets last October.

It paid a $600m deposit for the purchase, the biggest such acquisition deposit ever paid by an Irish company.

Buying the CIT leasing assets effectively doubles the size of Avolon, whose chief executive is Domhnal Slattery.

Avolon has a fleet of 426 owned, managed and on-order aircraft.

Its customers include airlines all over the world such as Air Berlin, Virgin Atlantic and Aerolineas Argentinas.

CIT's leasing arm had 282 jets at the end of December on operating leases that are part of the sale to Avolon.

Additionally, CIT had commitments to buy 128 jets, including 16 Boeing 787 Dreamliners and 37 Boeing 737s. All 17 aircraft due for delivery to CIT this year have lease commitments in place.

The net asset value of CIT's leasing assets is $9.6bn.

On top of that net asset value, Avolon is also paying a $627m premium for the CIT business.

Of the CIT commercial air net assets currently leased, almost $4bn are deployed with customers in the Asia-Pacific region, $2bn between the US and Canada, and $1.9bn in Europe.

An additional $1bn worth of assets are deployed in Latin America.

CIT pointed out that it incurred a $847m net tax expense last year related to the pending sale of its commercial air assets to Avolon.

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.

Mr Slattery remains Avolon's chief executive, while co-founders John Higgins and Andy Cronin also continue as chief commercial officer and chief financial officer respectively.

Irish Independent

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