CIT joint venture with TPG Special Situations Partners

CIT Group, a leading provider of commercial lending and leasing services, has announced a joint venture with funds managed by TPG Special Situations Partners (TSSP), the dedicated special situations and credit platform with over $12 billion of assets under management, and part of TPG, a leading global private investment firm.

The new entity, to be known as Strategic Credit Partners, will have a target size of $500 million and will provide senior secured financing to companies in a variety of industries throughout the US, including communications, healthcare, information services and technology, industrials and restaurants.

“We are pleased to enter into this strategic relationship with TSSP and announce the formation of this joint venture,” said Jim Hudak, president of CIT corporate finance. “Our efforts to support the financing needs of our customers will be greatly enhanced through this new relationship. This joint venture will further advance our efforts to grow our commercial lending franchise while providing us the opportunity to increase our agency roles and grow our relationships within the sponsor community.”

Alan Waxman, partner and chief investment officer of TSSP, said, “We are excited to enter into this new business partnership with CIT. We believe this new venture will allow us to extend our reach in providing critical financing to businesses in the US economy while delivering high-quality assets to our investors. This partnership with CIT reflects our shared views on building a unique platform centered on credit discipline and risk management in order to provide attractive risk-adjusted returns for our investors.”

Aviation leasing flying high

Separately, research released by CIT Aerospace, a division of CIT Group and a global leader in aircraft finance, suggests leasing prospects in the aviation sector remain good.

The study, “2015 Aerospace Outlook”, was conducted by Harris Poll among 100 airline fleet and finance executives with aircraft operating in countries around the world. It found that 81% expect interest rates to go up by more than 1% in the next two years, and three quarters (76%) anticipate paying more for financed aircraft as a result.

“Airline executives are taking advantage of current interest rate levels and low fuel prices to reduce ticket prices, invest in technology and increase their fleet utilization,” said Jeff Knittel, president of CIT transportation and international finance.

“However, they realize that the market is changing and many are preparing for future challenges around fuel price volatility, increased competition and rising interest rates. In fact, 63% believe higher interest rates will change their company’s views on purchasing new aircraft and 65% indicate that these higher rates will cause them to increase the lease content of their fleet.”

Over the next two years, executives say their businesses plan to increase in-flight sales (60%), the number of routes (58%) and the number of flights (55%).

More than half (54%) expect to increase the number of aircraft over the next two years. Over a five year timeframe, executives expect to lease a higher percentage of narrow body aircraft (on average 52%) than wide body (on average 33%).

Executives indicated that lease terms (62%), a lessor’s responsiveness to their requests (53%) and efficiency of the lease negotiations process (48%) were the most important areas when leasing aircraft.

In addition, more than four in five (86%) believe that manufacturers will launch replacement programs for the popular single aisle market, which will enter into service before 2030.

Nearly eight in ten (79%) agree that used aircraft in the 130-seat category will be in high demand in the next 10 years due to the current lack of new units in the same seat category entering the market.

Technology is singled out as likely to have the biggest positive impact on their company in the next five years by 73% of executives. Three-quarters (75%) report that their company already provides, or plans to provide in the next five years, internet connectivity to passengers on narrow body and wide body aircraft.