Avolon Aerospace Leasing Ltd., the private-equity backed aircraft financing company, has hired JPMorgan (JPM:US) Chase & Co. and Morgan Stanley to explore a possible initial public offering or sale, according to people familiar with its plans.
Avolon, owned by Oak Hill Capital Partners LP, Cinven Ltd., and CVC Capital Partners Ltd., may seek a U.S. listing should it opt for an IPO, said one of the people, who asked not to be named because the discussions are private. The company, with the youngest fleet of any large aircraft lessor and 198 planes in its portfolio and on order, also counts Singapore’s sovereign wealth fund among its investors, according to its website.
Avolon Chief Executive Officer Domhnal Slattery said last year he was encouraged by transactions including Sumitomo Mitsui Financial Group Inc.’s $7.3 billion purchase of Royal Bank of Scotland Group Plc’s aviation unit and that he would explore strategic options as early as 2014. Companies in Europe have raised about $17 billion in IPOs this year, more than triple what they did a year earlier in the same period, data compiled by Bloomberg show.
Representatives for Avolon, based in Dublin, Oak Hill, Cinven, CVC, Morgan Stanley (MS:US) and JPMorgan declined to comment.
Airfinance Journal reported earlier today that Avolon and lessor Awas Aviation Capital Ltd. are exploring options for a sale, with Awas hiring Deutsche Bank AG and Goldman Sachs (GS:US) Group Inc. It didn’t identify bankers hired by Avolon to explore options.
Airlines buying large commercial aircraft will require $100 billion in financing this year, according to Avolon estimates. Lessors make up about 40 percent of the aircraft financing market now, a figure that is set to rise in coming years.
To support growth, the companies rely increasingly on external funding, including capital markets, and transactions including lessors have picked up. In December, AerCap Holdings NV (AER:US) agreed to buy International Lease Finance Corp. from American International Group Inc. for $15 billion to create a lessor rivaling General Electric Co.’s Gecas unit for size.
Avolon has raised $7.2 billion in capital since its launch, with its four owners putting in $1.4 billion in equity investments. Its most recent financing closed last month, when it secured a $500 million debt facility to finance aircraft purchases this year.
Mubadala Development Co., Abu Dhabi’s investment and development company, is considering an initial public offering for its Swiss SR Technics aircraft-maintenance business, people with knowledge of the matter said this week.
Other lessor transactions in the last 24 months include the purchase of Oaktree Capital Group LLC (OAK:US)’s Jackson Square Aviation to Mitsubishi UFJ Lease & Finance Co. for about $1.1 billion, and Babcock & Brown Aircraft Management’s sale of a 50 percent stake in December 2012 to Onex Corp.
Slattery himself previously set up the RBS aircraft leasing division, and left three years before it was sold to Sumitomo. Singapore sovereign-wealth fund GIC Pte agreed to enter Avolon as a shareholder in October 2011, a little more than a year after the lessor’s formation in May 2010.
A spokeswoman for GIC did not immediately respond to telephone requests seeking comment outside of regular business hours.
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