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http://online.wsj.com/article/BT-CO-20090723-708019.html CHICAGO (Dow Jones)--CIT Group Inc. (CIT) could raise more than $8 billion from the sale of its profitable transport assets, though the value likely would be pressured by weakening end markets and rival sellers. In recent quarters, the aircraft and rail leasing units have been the most profitable for CIT, the U.S. financial services group that staved off bankruptcy this week with $3 billion in fresh financing. The parent company still faces serious financial challenges. CIT used part of its aerospace unit's assets as collateral for the fresh funding, which it secured after the U.S. government last week backtracked from providing support. Lenders would likely have to approve any transaction involving aircraft. The company hasn't confirmed whether it would seek buyers for the aircraft and rail units, and couldn't immediately be reached for comment Wednesday. Both businesses have attracted interest from prospective bidders over the past two years. CIT dropped plans last year to sell the rail unit after finding offers unattractive, while the larger aircraft business would join three or more rivals seeking buyers, and market conditions in both sectors have softened. General Electric Co. (GE), which owns the largest aircraft leasing business, also explored a sale of its rail unit last year. The CIT Aerospace unit leases and manages a fleet of 302 aircraft, according to consultant UBM Aviation Worldwide, ranking it among the top five in the industry by value. It has an additional 109 on order. While CIT hasn't signaled plans to sell transportation assets, any effort to raise funds faces the hurdle of efforts by American International Group Inc. (AIG) to sell International Lease Finance Corp., one of the two dominant aircraft leasing companies. GE's Gecas unit is the other major world player. Richard Aboulafia, an aerospace consultant with Teal Group, said valuing CIT Aerospace may hinge on the fate of ILFC, given the latter's size. AIG's protracted talks with potential private-equity buyers have seen the price tag shorn from a book value of around $7 billion to less than $4 billion, according to people familiar with the process. CreditSights said the unit could realize around $5.3 billion after repaying debt. Royal Bank of Scotland PLC (RBS) has also canvassed buyers for its RBS Aviation Capital business, according to leasing industry sources, dropping an order for 25 Boeing 787s to avoid pre-delivery payments and improve the marketability of the business. Chinese banks have been active in boosting aircraft assets during recent months, and bankers said listed leasing companies such as Aircastle Ltd. (AYR), AerCap Holdings (AER) and Genesis Lease Ltd. (GLS) may also seek opportunistic purchases of some aircraft. Any renewed effort by CIT to offload its rail business may run into the buffers caused by overcapacity amid a sharp decline in freight volume in the U.S. and Europe. The company had a portfolio of 101,400 railcars as of March 31, second only to GATX Corp. (GMT).CIT doesn't break down the rail assets, but the book value of the fleet - alongside bus and other non-aircraft transport equipment - was $2.73 billion at the end of the first quarter. CreditSights valued the rail book at $2.3 billion after repaying debt. Jeff Immelt, GE's chairman and chief executive, noted on an earnings call last week that there are 5,400 locomotives parked across the industry, a third of them owned by the U.S. conglomerate. Well over 100,000 railcars, many of them leased, also stand idle. Burlington Northern Santa Corp. (BNI), Union Pacific Corp. (UNP) and CSX Corp. (CSX) all lease some rail cars from CIT, but none is voicing much concern on the unit's fate. "We have ample capacity in terms of rolling stock," said a Burlingon spokesman. -By Ann Keeton; Dow Jones Newswires; 312-750-4120;ann.keeton@dowjones.com (Doug Cameron and Bob Sechler contributed to this article
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