DUBLIN (Reuters) – Irish leasing giant Avolon has agreed to acquire smaller rival Castlelake Aviation Limited, adding a $5 billion portfolio of assets that include 118 aircraft, the world’s second-largest aircraft lessor said on Friday.
Avolon, along with AerCap and SMBC Aviation Capital, is one of a trio of Ireland-headquartered companies that dominate the aircraft leasing industry. More than half of the world’s passenger aircraft fleet is owned by aircraft lessors.
Avolon said the transaction, which is expected to close in the first quarter of next year, will build on its fleet of more than 1,000 aircraft at attractive yields by adding a relatively young fleet with an average age of 4.7 years.
Castlelake Aviation is owned by global alternative investment manager Castlelake L.P. Its assets include 105 mostly new technology aircraft on lease to airlines and commitments to purchase 13 new jets, Avolon said.
Avolon Chief Financial Officer Ross O’Connor said the fleet profile was very attractive, as was the impact on accelerating earnings growth over the next number of quarters as Avolon seeks to improve its credit rating to BBB from BBB-.
“The key for us was to do something that was going to accelerate our momentum with the rating agencies,” O’Connor told Reuters.
He said current market conditions were allowing some of the stronger leasing companies with investment grade balance sheets to do larger deals and that Avolon could potentially look at further opportunities in the future.
Avolon said it would finance the transaction with $3.3 billion of debt acquired from Castlelake, with the balance made up from existing sources of liquidity.
(Reporting by Padraic Halpin and Conor Humphries; Editing by David Goodman and Jane Merriman)
