CIT Group to sell CIT Commercial Air to Avolon Holdings for $10B
CIT Group announced that it has entered into a definitive agreement to sell CIT Commercial Air, its commercial aircraft leasing business, to Avolon Holdings, the international aircraft leasing company and a wholly-owned subsidiary of Bohai Capital Holding Co. The transaction is expected to close by the end of the first quarter of 2017, subject to regulatory approvals and customary closing conditions. CIT has received a "non-objection" from the Federal Reserve Bank of New York for its Amended Capital Plan subject to the closing of the transaction. The Amended Capital Plan authorizes CIT to return $2.975B of common equity to shareholders from the net proceeds of the sale; return up to an additional $0.325B of common equity contingent upon the issuance of a similar amount of Tier 1 qualifying preferred stock; and pay common dividends totaling $64M per year after the transaction is completed, subject to quarterly approval by the CIT Board of Directors. 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 $11.1B and liabilities of $1.7B. The Adjusted Net Assets Amount total $9.4B which Avolon is purchasing for a price of $10B, representing a premium of 6.7%. The transaction is subject to receipt of regulatory approvals in the United States, China and certain other foreign jurisdictions, the approval of Bohai's shareholders and the satisfaction of customary closing conditions. HNA Group, Bohai's majority shareholder, has agreed to vote its shares in Bohai in favor of the transaction. To reflect its commitment to the transaction, Avolon has deposited $500M into an escrow account with a U.S. bank (which will be increased to $600M 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 is not consummated.