CIT sells aircraft leasing to Avolon

Middle market finance specialists CIT Group has announced it is to sell CIT Commercial Air, its commercial aircraft leasing business, to Avolon Holdings Limited, the international aircraft leasing company and a wholly-owned subsidiary of Bohai Capital Holding Co. Ltd.

CIT expects to return $2.975 billion of common equity to shareholders from the net proceeds of the sale; return up to an additional $0.325 billion of common equity contingent upon the issuance of a similar amount of Tier 1 qualifying preferred stock; and pay common dividends totaling $64 million per year after the transaction is completed.

“The sale of CIT Commercial Air represents an important milestone for CIT and follows an extensive dual-track process that was designed to maximize shareholder value. This transaction will strengthen our balance sheet, simplify our business and enable us to return significant capital to our shareholders,” said Ellen Alemany, chairwoman and chief executive officer of CIT Group. “We are making meaningful progress on our strategy to create a leading national middle-market bank.

Regulatory approval

CIT is selling the CIT Commercial Air business to Avolon, including its operations, forward order commitments, and as of June 30, 2016, certain assets of $11.1 billion and liabilities of $1.7 billion.

The transaction is expected to close by the end of the first quarter of 2017, subject to regulatory approvals in the US, China and certain other foreign jurisdictions, the approval of Bohai’s shareholders and the satisfaction of customary closing conditions.

To reflect its commitment to the transaction, Avolon has deposited $500 million into an escrow account with a US bank (which will be increased to $600 million during the pendency of the transaction), which is payable to CIT at closing as part of the purchase price and in certain circumstances if the transaction does not take place.