Global investment company KKR & Co., Inc. (KKR) agreed to buy an $ 800 million aviation loan portfolio from CIT Group Inc. (CIT). The portfolio will be serviced by AV Airfinance Limited, a newly formed global commercial aviation lending service set up by a group of financial industry veterans in conjunction with KKR.
The loan portfolio covers over 50 loans for approximately 60 commercial aircraft, with average returns in single digits and an average remaining maturity of approximately four years.
The portfolio will spur the launch of KKR’s aviation lending business with AV AirFinance. (See Analysis of KKR reserves on TipRanks)
Dan Petrzak, Partner and Co-Head of Private Lending at KKR, said: “This deal marks an exciting new expansion of our asset-based financing strategy for direct lending for commercial aviation, and we believe AV AirFinance is well positioned to become the leading lender in the global commercial aviation market ”.
Most of the loans have already been transferred, and the balance will be transferred by the end of the second quarter of 2021. Upon completion, this sale will mark CIT Group’s complete exit from the aircraft lending business.
Following the company’s strong first quarter results, Morgan Stanley analyst Michael Cypris retained its Hold rating on the stock, raising its target price to $ 64 (13.3% upside) from $ 60.
The rest of the market is cautiously optimistic about the stock with a “moderate buy” consensus forecast based on 8 buys and 3 retentions. IN KKR analyst average target price $ 64 implies upside potential of 13.3% to current levels. The stock is up 87.7% over the past year.
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