Avolon Castlelake News Image scaled
Avolon, a leading global aviation finance company, announces an agreement to acquire Castlelake Aviation Limited (‘CA Ltd’), an entity managed by Castlelake L.P., the global alternative investment manager.
CA Ltd.’s total assets as of 31 March 2024 were $5.0 billion, including a portfolio of 105 aircraft on lease, commitments for 13 new-technology aircraft, 2 engines on lease, and 9 loans. The portfolio is 68% narrowbody aircraft, 70% new technology aircraft, has a weighted average aircraft age of 4.7 years, and a weighted average remaining lease term of 8.4 years.
The transaction will accelerate Avolon’s earnings growth, building its fleet at attractive yields. It is supported by Avolon’s strong balance sheet position, with $8.2 billion of available liquidity at 30 June 2024. Pro forma for the transaction Avolon’s balance sheet metrics remain within its target investment grade ranges, with net debt to equity of 2.8x and next 12 months sources to uses of 1.5x.
The CA Ltd portfolio has up to $3.3 billion of transferable debt available to Avolon on closing, with the balance funded from Avolon’s existing sources of liquidity. The transaction is expected to close in Q1 2025, subject to customary closing conditions.
This news follows Avolon’s upbeat report from earlier this year. It also sends a signal of further industry consolidation, as lessors merge into ever larger companies with large portfolios. This consolidation is important because it moves the industry’s center of gravity. Bigger customers don’t pay the same as smaller customers. Bigger customers therefore have better margins and for a lessor, that margin is everything. This margin allows a big lessor negotiating space after winning better deals from OEMs to offer better terms to certain airlines.
In the classic line, from the hands of the weak, to the hands of the strong. The outcome of this deal is likely to lead to more deals just like this, as lessors bulk up.
