On Friday, listed personal and commercial banking giant CIT Group announced that it is selling its aviation loan portfolio, comprising nearly $800 million in assets over 50 loans for around 60 commercial aircraft, to private equity giant KKR. According to CIT’s announcement confirming the deal, the loans have an average yield in the mid-single digits and an average term remaining of around four years.
The portfolio will serve as the basis for KKR’s newly launched aviation loan servicer, AV AirFinance Limited. As part of the transaction, selected members of CIT’s aviation team will also join AV AirFinance, where they will focus on servicing and originating loans.
“We are pleased to have reached an agreement with a team that understands the aviation lending business and will serve customers well,” said Phil Robbins, CIT President of Asset Management and Capital Markets. “This transaction allows CIT to rebalance our portfolio mix and reinvest in core businesses.”
“AV AirFinance is an exciting expansion of our asset-based finance strategy into directly originated commercial aircraft loans, which represent an attractive downside protected investment opportunity for our long-term capital,” said Dan Pietrzak, Partner and Co-head of Private Credit at KKR.
The transaction marks the expansion of KKR’s long-standing asset-based finance strategy into directly originated and held commercial aviation loans. Pietrzak added he is confident that AV AirFinance is well positioned to become a leading leader for the global commercial aviation market.
The launch of a dedicated aviation lending platform marks a significant milestone for KKR in the aviation sector, building on our experience in areas including commercial aircraft leasing and private aviation,” said KKR Principal Patrick Clancy, in a separate comment. “We are thrilled to partner with the AV AirFinance team to offer differentiated solutions to the market, and we see significant opportunities for future growth supported by a large market opportunity and the favorable long-term outlook for the commercial aviation industry.”
AV AirFinance will be led by Chief Executive Officer Siggi Kristinsson, an industry veteran who most recently co-founded and served as CEO of Sweden’s Volito Aviation Services AB, a subsidiary of the investment firm which provides debt origination and advisory services to Goldman Sachs and other financial institutions. He will be supported by a team of aircraft financing specialists with decades of experience in secured lending totaling over $25 billion in value across multiple market cycles.
The acquisition is yet another bullish call on the aviation space for KKR. Earlier this week, KKR bought Macquarie’s long-held private planes business, Atlantic Aviation, for nearly $4.5 billion in cash and debt.