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Avolon to acquire aircraft leasing business of CIT Group with combined fleet of 910 aircraft with value of over US$43 billion, creating the world’s third largest aircraft leasing platform. Back
October 6th 2016: Avolon Holdings Limited, a wholly owned subsidiary of Bohai Capital Holding Co.Ltd. listed on the Shenzhen Stock Exchange announced an agreement to acquire the aircraft leasing business of CIT Group Inc. (NYSE: CIT). The deal will create an in-service, (owned and managed) and committed fleet of 910 aircraft valued at over US$43bn. The transaction is subject to required regulatory approvals, including approval from the US SEC, and is expected to close in Q1 2017.
The CIT portfolio has been the subject of a strong bidding procxesss over the past month, and Avolon's successful acquisition will double the scale of its leasing business and 'create the world’s third largest aircraft leasing platform', according to a statement from the company, issued at 22.00 hrs GMT on October 6th. The transaction is expected to close in the first quarter of 2017.

The scale of the acquisition for Avolon is very large - Avolon is acquiring an in-service fleet of 334 (owned and managed) aircraft from CIT, compared with its own in-service fleet of 177 as of June 30th, bringing the combined total to 511. As would be expected, Avolon's order committments are larger - 216 against 133 for CIT.

Avolon will acquire total assets of US$11.1 billion as of 30 June 2016 and associated liabilities. Avolon will pay US$10.0 billion, a premium of 6.7% to the 30 June 2016 NAV of US$9.4 billion. The purchase price is subject to adjustment for changes in NAV between 30 June 2016 and the closing date of the transaction. The transaction will be financed by a combination of Avolon’s cash; new equity contributed by Bohai; and acquisition debt financing of US$8.5 billion that has been committed by Morgan Stanley & Co. LLC and UBS Investment Bank..

The rationale for the transaction, according to the statement is that the CIT portfolio are 'complementary businesses which expand Avolon’s existing customer base by 69 airlines in 20 countries to 154 customers in 61 countries - enhancing the global footprint of the business to drive growth and balanced, risk adjusted returns'.

It furthermore will result in the following for Avolon:
  • Combined business will have approximately one third of in-service aircraft leased into each of the Americas, EMEA and Asia-Pacific regions, providing balanced geographic exposure;
  • Pipeline of future deliveries for 282 new technology aircraft which underpins growth objectives;
  • Business is well capitalised to pursue further growth opportunities across multiple acquisition channels; balance sheet is strong with a long-term strategic shareholder committed to the sector;

  • Transaction highlights:
  • Avolon to acquire the CIT Group aircraft leasing business including 334 owned and managed aircraft; and 133 aircraft on order or committed;
  • Avolon will acquire total assets as of 30 June 2016 of US$11.1 billion and associated liabilities. Avolon will pay US$10.0 billion for US$9.4 billion of net asset value (“NAV”) as of 30 Jun 2016, which represents a premium of 6.7%;
  • The combined owned, managed and committed fleet comprises 910 aircraft valued at over US$43 billion;
  • Combined orders and commitments of 349 aircraft includes 282 new technology aircraft comprising: 195 Airbus aircraft (A320neo family, A330neo and A350); 59 Boeing 737 MAX aircraft; and 28 Boeing 787 aircraft;
  • Avolon's pro-forma owned, in-service fleet of 511 aircraft has an average aircraft age of 4.6 years, the youngest owned, in-service fleet among the world’s top three aircraft leasing companies, with an average remaining lease term of 6.7 years. (Fleet numbers: as of 30 June, 2016);
  • 'The combined business will have a proven, experienced management team with the operating and financial disciplines that have driven Avolon from launch in 2010 to become the world’s third largest aircraft leasing business in six years'.

    Avolon CEO, D�mhnal Slattery, said: “From a standing start we will have built Avolon into a leading global player in six years. We are delighted to announce an agreement to acquire the CIT aircraft leasing platform. It is a strong business with an excellent reputation in the market. While this transaction is strategically compelling and will double the scale of Avolon, it is not the summit of our ambition. Avolon has a strong brand, a best-in-class fleet, a proven business model and a long-term strategic shareholder committed to the sector. We look forward to continuing to drive the disciplined growth of the business in the years ahead.”

    Chris Jin, CEO of Bohai, said: “Our vision at Bohai is to build each of our transportation finance businesses into global leaders. Our decision to acquire Avolon in 2015 was a key step towards that objective. The Avolon team has already delivered remarkable growth in building a new platform into a leading industry franchise. They are now taking a further exciting step towards our collective goal to become a true global leader in transport finance. We are confident in the prospects for the enlarged business which has a strong, proven team and the operating disciplines to drive sustainable performance.”

    Combined Business (Avolon + CIT) Key Metrics:
    Total Fleet (aircraft): 910; Total Fleet (value) US$43+ billion; Owned & Managed In-Service Fleet (aircraft): 561; Orders & Commitments (aircraft) 349;
    Average Fleet Age (years: based on 511 owned, in-service aircraft): 4.6; Average Lease Term Remaining (years) 6.7yrs; Customers: 154. (Note: Fleet numbers as of 30 June, 2016).

    Closing Conditions & Regulatory Approvals
    The Transaction is subject to customary closing conditions and certain required regulatory approvals. The Transaction is subject to Bohai shareholder approval. HNA Group, Bohai’s largest shareholder, has agreed to vote its shareholding in Bohai in favour of the Transaction. The transaction is expected to close in the first quarter of 2017.

    Transaction Advisors
    Avolon’s financial advisors for the transaction were UBS Investment Bank and Morgan Stanley & Co. LLC. Weil, Gotshal & Manges LLP and Freshfields Bruckhaus Deringer acted as Avolon’s legal advisors. KPMG and E&Y also advised on the transaction.

    Company's Profile:(Avolon)
    Headquartered in Ireland, with offices in the United States, Dubai, Singapore, Hong Kong and Shanghai, Avolon provides aircraft leasing and lease management services. Avolon is a wholly-owned, indirect subsidiary of Bohai Capital Holding Co., Ltd., a Chinese public company listed on the Shenzhen Stock Exchange. Website: www.avolon.aero. Twitter: @avolon_aero
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