Aircraft mega-exit yields big IRR

Guggenheim Partners has earned a big payday in the $1.6bn sale of its aircraft portfolio to an affiliate of alternative investment giant Fortress Investment.

Guggenheim Aviation Partners, a division of Chicago- and New York-based financial services group Guggenheim Partners, has agreed to sell the remainder of the aircraft assets from its debut aviation fund to an affiliate of Fortress Investment Group.

The transaction has a value of roughly $1.595 billion (€1.2 billion), according to a statement. The sale involves the transfer of 38 aircraft to Aircastle Limited, a publicly traded acquirer and lessor of aircraft that is sponsored by Fortress. Aircastle went public last August in a $200 million IPO.

Guggenheim’s sale represents an exit of the bulk of the assets it acquired through its debut, $280 million private equity aviation fund closed in 2005, according to a source. The exit gives the fund, Guggenheim Aviation Investment Fund, a significant return, the source added.

Guggenheim Aviation, based in Chicago and led by former GE executive Stephen Rimmer, is currently in the market with a follow-on fund with a target of approximately $750 million. Already the fund owns or has contracted to purchase 19 aircraft, including several of the newly launched Airbus A330-200F freighters.

In a statement, Rimmer said: “This transaction provides GAIF investors the opportunity to achieve their investment objectives. While it wasn’t an anticipated realization in respect to timing, we believe it presented an attractive risk return profile. . .”

Guggenheim Aviation often acquires passenger aircraft and then converts these assets into freight aircraft and leases them to US and non-US users.

Fortress Investment, based in New York, is one of the largest hedge fund and private equity investors in the world. The firm is preparing to list 10 percent of its management company on the New York Stock Exchange. The IPO is expected to raise as much as $634 million, valuing the firm at $6.34 billion – a rich valuation equating roughly 21 percent of Fortress assets under management. Fortress also manages two publicly traded real estate affiliates in the “Castle” family.