EX-99.1 2 a2229503zex-99_1.htm EX-99.1

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TABLE OF CONTENTS
INDEX TO FINANCIAL STATEMENTS
Index to the Notes to Combined Financial Statements
Index to the Notes to Interim Combined Financial Statements (Unaudited)


Exhibit 99.1

LOGO

[    ·    ]

Dear CIT Group Inc. Stockholder:

        We previously announced plans to separate our commercial aircraft leasing business from our other businesses. The separation will occur by means of a spin-off of a newly formed company named C2 Aviation Capital, Inc. ("C2"), which will own the commercial aircraft leasing business. CIT Group Inc. ("CIT"), the existing publicly traded company in which you currently own common stock, will continue to own and operate its commercial banking, consumer and community banking, and other transportation finance businesses. The separation will create two publicly traded companies, which will be better strategically, financially and operationally positioned to capitalize on growth opportunities by creating capital structures tailored to their respective business needs and focusing resources on their own respective strategic priorities.

        CIT maintains its ongoing commitment to its commercial banking and consumer and community banking businesses, and will continue to provide financing, leasing and advisory services principally to middle market companies in a wide variety of industries primarily in North America, and equipment financing and leasing solutions to the transportation industry worldwide. C2 will continue to be a leading commercial aircraft leasing franchise, with one of the world's largest fleets, a diverse and growing customer base and a strong order pipeline of next-generation aircraft. C2's experienced management team will be focused on the commercial aircraft leasing business, and C2 will operate under a regulatory regime comparable to that of its competitors.

        The separation will provide current CIT stockholders with equity ownership in both CIT and C2. We believe that both companies will be well-positioned for future success and to create value for stockholders. We expect that the separation will be tax-free to CIT stockholders.

        The separation will be effected by means of a pro rata distribution of all of the outstanding shares of C2 common stock to holders of CIT common stock. Following the distribution, C2 will be a separate public company. Each CIT stockholder will receive one share of C2 common stock for every [    ·    ] shares of CIT common stock held at the close of business on [    ·    ], the record date for the distribution. No vote of CIT stockholders is required for the distribution. You do not need to take any action to receive the shares of C2 common stock to which you are entitled as a CIT stockholder, and you will not be required to make any payments or to surrender or exchange your CIT common stock.

        C2 intends to apply to have its common stock authorized for listing on the New York Stock Exchange under the symbol "CTWO," and CIT will continue to trade on the New York Stock Exchange under the symbol "CIT."

        I encourage you to read the attached information statement, which is being provided to all CIT stockholders who held shares on the record date for the distribution. The information statement describes the separation in detail and contains important business and financial information about C2.

        We expect the separation will provide opportunities to both companies, our stockholders, our employees, and all of the customers we serve. We thank you for your continuing support.

  Sincerely,

 

Ellen R. Alemany
Chairwoman and Chief Executive Officer
CIT Group Inc.


LOGO

[    ·    ]

Dear Future C2 Aviation Capital, Inc. Stockholder:

        It is our pleasure to welcome you as a future stockholder of C2 Aviation Capital, Inc. ("C2"), whose common stock we intend to list on the New York Stock Exchange under the symbol "CTWO." Although we will be newly independent, we have long operated a leading commercial aircraft leasing business, financing the fleets of many of the largest airlines across the world. With over 40 years of experience, through several industry cycles and varied market conditions, we have deep knowledge and expertise in the commercial aircraft leasing business and have built long-standing relationships with manufacturers and customers. We maintain a balanced and diverse portfolio and leverage our relationships and marketing expertise to add value by expanding manufacturers' customer bases. We seek to opportunistically source and lease aircraft that fit airlines' needs. As we have in the past, we intend to continue to innovate to provide the most efficient means of financing commercial aircraft, delivering growth as the airline industry, and airline leasing sector in particular, continues its expansion in both emerging and developed markets.

        Our owned and serviced portfolio of 334 aircraft makes us one of the world's five largest aircraft lessors by aircraft count as of June 30, 2016, according to Ascend Flightglobal Consultancy. Our pipeline is robust, and as of June 30, 2016 includes commitments to purchase 132 new aircraft. We expect our strategically assembled fleet of aircraft to be in high demand, allowing us to achieve a high rate of lease placements on attractive lease terms. Our scale and relationships with approximately 100 customers in 49 countries help mitigate the credit risk of any specific customer and the economic or political risk in any geographic area, while providing us with a worldwide platform to source and capitalize on opportunities. In the year ended December 31, 2015, we generated $1.19 billion in revenue and $386 million of net income.

        Our stockholder value proposition is simple: provide consistent and attractive risk-adjusted returns throughout aviation industry cycles by maintaining an attractive fleet, leveraging our relationships with manufacturers and customers and successfully managing our credit and financing risk.

        We invite you to learn more about C2 by reading the attached information statement. We are excited by our future prospects, and look forward to your support as a stockholder of C2.

    Sincerely,

 

 

C. Jeffrey Knittel
Chief Executive Officer
C2 Aviation Capital, Inc.

Information contained herein is subject to completion or amendment. A Registration Statement on Form 10 relating to these securities has been filed with the U.S. Securities and Exchange Commission under the U.S. Securities Exchange Act of 1934, as amended.

PRELIMINARY AND SUBJECT TO COMPLETION, DATED AUGUST 31, 2016

C2 Aviation Capital, Inc.

        This information statement is being furnished in connection with the distribution by CIT Group Inc. ("CIT") to its stockholders of all of the outstanding shares of common stock of C2 Aviation Capital, Inc., a Delaware corporation ("C2"), currently a wholly owned subsidiary of CIT that will hold directly or indirectly the assets and liabilities associated with CIT's commercial aircraft leasing business. To implement the distribution, CIT will distribute all of the outstanding shares of C2 common stock on a pro rata basis to CIT stockholders in a manner that is intended to be tax-free for U.S. federal income tax purposes. Following the distribution, C2 will be a separate public company.

        For every [    ·    ] shares of CIT common stock held of record by you at the close of business on [    ·    ], the record date for the distribution, you will receive one share of C2 common stock. You will receive cash in lieu of any fractional shares of C2 common stock that you would have received after application of the above ratio. As discussed in the section entitled "The Separation and Distribution—Trading Between the Record Date and Distribution Date," if you sell your shares of CIT common stock in the "regular-way" market after the record date and before the distribution, you also will be selling your right to receive shares of C2 common stock in the distribution. We expect the shares of C2 common stock to be distributed by CIT to you at 12:01 a.m., Eastern Time, on [    ·    ]. The date of the distribution of the shares of C2 common stock is referred to as the "distribution date."

        No vote of CIT stockholders is required for the distribution. Therefore, you are not being asked for a proxy, and you are requested not to send CIT a proxy, in connection with the distribution. You do not need to pay any consideration or exchange or surrender your existing shares of CIT common stock or take any other action to receive your shares of C2 common stock.

        There is no current trading market for C2 common stock, although we expect that a limited market, commonly known as a "when-issued" trading market, will develop on or about the record date for the distribution, and we expect "regular-way" trading of C2 common stock to begin on the first trading day following the completion of the distribution. C2 intends to apply to have its common stock authorized for listing on the New York Stock Exchange ("NYSE") under the symbol "CTWO." Following the spin-off, CIT will continue to trade on the NYSE under the symbol "CIT."

        In reviewing this information statement, you should carefully consider the matters described under the section "Risk Factors" beginning on page 24.

        Neither the U.S. Securities and Exchange Commission nor any state securities commission has approved or disapproved these securities or determined if this information statement is truthful or complete. Any representation to the contrary is a criminal offense.

        This information statement does not constitute an offer to sell or the solicitation of an offer to buy any securities.

The date of this information statement is [    ·    ], 2016.

This information statement was first made available to CIT stockholders on or about [    ·    ].



TABLE OF CONTENTS

 
  Page  

Questions and Answers About the Separation and Distribution

    1  

Information Statement Summary

    8  

Risk Factors

    24  

Cautionary Statement Concerning Forward-Looking Statements

    49  

The Separation and Distribution

    51  

Dividend Policy

    59  

Capitalization

    60  

Selected Historical Combined Financial Data

    61  

Unaudited Pro Forma Combined Financial Statements

    63  

Industry

    69  

Business

    90  

Management's Discussion and Analysis of Financial Condition and Results of Operations

    102  

Management

    134  

Directors

    136  

Executive Compensation

    142  

Director Compensation

    189  

Relationship with CIT Following the Separation and Distribution

    190  

Material U.S. Federal Income Tax Consequences

    196  

Description of Material Indebtedness

    199  

Security Ownership of Certain Beneficial Owners and Management

    200  

Description of C2's Capital Stock

    201  

Where You Can Find More Information

    206  

Index to Financial Statements

    F-1  


Presentation of Information

        Except as otherwise indicated or unless the context otherwise requires, the information included in this information statement about C2 assumes the completion of all of the transactions referred to in this information statement in connection with the separation and distribution. Unless the context otherwise requires, references in this information statement to "C2," "we," "us," "our" and "the company" refer to C2 Aviation Capital, Inc., a Delaware corporation, and its combined subsidiaries. References in this information statement to "CIT" refer to CIT Group Inc., a Delaware corporation, and its consolidated subsidiaries (other than, after the distribution, C2 and its combined subsidiaries), unless the context otherwise requires. References to C2's historical business and operations refer to the business and operations of CIT's commercial aircraft leasing business that will be transferred to C2 in connection with the separation and distribution. References in this information statement to the "separation" refer to the separation of the commercial aircraft leasing business from CIT's other businesses and the creation, as a result of the distribution, of an independent, publicly traded company, C2, to hold the assets and liabilities associated with the commercial aircraft leasing business after the distribution. References in this information statement to the "distribution" refer to the distribution of all of C2's outstanding common stock to CIT's stockholders on a pro rata basis.

i


 


QUESTIONS AND ANSWERS ABOUT THE SEPARATION AND DISTRIBUTION

What is C2 and why is CIT separating C2's business and distributing C2 stock?

  C2, which is currently a wholly owned subsidiary of CIT, was formed to own and operate CIT's commercial aircraft leasing business. The separation of C2 from CIT and the distribution of C2 common stock are intended to provide you with equity ownership in two separate publicly traded companies that will be able to better focus on each of their respective businesses. CIT and C2 expect that the separation will result in enhanced long-term performance of each business for the reasons discussed in the section entitled "The Separation and Distribution—Reasons for the Separation."

Why am I receiving this document?

 

CIT is delivering this document to you because you are a holder of CIT common stock. If you are a holder of CIT common stock at the close of business on [·], the record date of the distribution, you will be entitled to receive one share of C2 common stock for every [·] shares of CIT common stock that you held at the close of business on such date. This document will help you understand how the separation and distribution will affect your post-separation ownership in CIT and C2, respectively.

How will the separation of C2 from CIT work?

 

To accomplish the separation, CIT will distribute all of the outstanding shares of C2 common stock to CIT stockholders on a pro rata basis in a distribution intended to be tax-free for U.S. federal income tax purposes.

Why is the separation of C2 structured as a distribution?

 

CIT believes that a tax-free distribution in the United States, for U.S. federal income tax purposes, of shares of C2 common stock to CIT stockholders is an efficient way to separate its commercial aircraft leasing business in a manner that will create long-term value for CIT, C2 and their respective stockholders.

What is the record date for the distribution?

 

The record date for the distribution will be [·].

When will the distribution occur?

 

It is expected that all of the outstanding shares of C2 common stock will be distributed by CIT at 12:01 a.m., Eastern Time, on [·] to holders of record of CIT common stock at the close of business on [·], the record date for the distribution.

What do stockholders need to do to participate in the distribution?

 

Stockholders of CIT as of the record date for the distribution will not be required to take any action to receive shares of C2 common stock in the distribution, but you are urged to read this entire information statement carefully. No stockholder approval of the distribution is required. You are not being asked for a proxy. You do not need to pay any consideration, exchange or surrender your existing shares of CIT common stock or take any other action to receive your shares of C2 common stock. Please do not send in any CIT stock certificates you may have. The distribution will not affect the number of outstanding shares of CIT common stock or any rights of CIT stockholders, although it will affect the market value of each outstanding share of CIT common stock.

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How will shares of C2 common stock be issued?

 

You will receive shares of C2 common stock through the same channels that you currently use to hold or trade CIT common stock, whether through a brokerage account, 401(k) plan or other channel. Receipt of C2 shares will be documented for you in the same manner that you typically receive stockholder updates, such as monthly broker statements and 401(k) statements.

 

If you own CIT common stock at the close of business on [·], the record date for the distribution, including shares owned in certificate form, CIT, with the assistance of [·], the distribution agent for the distribution, will electronically distribute shares of C2 common stock to you or to your brokerage firm on your behalf in book-entry form. [·] will mail you a book-entry account statement that reflects your shares of C2 common stock, or your bank or brokerage firm will credit your account for the shares.

How many shares of C2 common stock will I receive in the distribution?

 

CIT will distribute to you one share of C2 common stock for every [·] shares of CIT common stock held by you at the close of business on the record date for the distribution. Based on approximately [·] shares of CIT common stock outstanding as of [·], a total of approximately [·] shares of C2 common stock will be distributed. For additional information on the distribution, see "The Separation and Distribution."

Will C2 issue fractional shares of its common stock in the distribution?

 

No. C2 will not issue fractional shares of its common stock in the distribution. Fractional shares that CIT stockholders would otherwise have been entitled to receive will be aggregated and sold in the public market by the distribution agent. The aggregate net cash proceeds of these sales will be distributed pro rata (based on the fractional share such holder would otherwise be entitled to receive) to those stockholders who would otherwise have been entitled to receive fractional shares. Recipients of cash in lieu of fractional shares will not be entitled to any interest on the amounts of payment made in lieu of fractional shares.

What are the conditions to the distribution?

 

The distribution is subject to the satisfaction (or waiver by CIT in its sole discretion) of the following conditions:

 

the transfer of assets and liabilities from CIT to C2 shall be completed in accordance with the separation and distribution agreement;

 

CIT shall have received an opinion from CIT's outside tax counsel to the effect that the requirements for tax-free treatment under Sections 355(a) and 368(a)(1)(D) of the Internal Revenue Code of 1986, as amended (the "Code"), should be satisfied;

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an independent appraisal firm acceptable to CIT shall have delivered one or more opinions to the board of directors of CIT at the time or times requested by the board of directors of CIT confirming the solvency and financial viability of CIT before the consummation of the distribution and each of CIT and C2 after consummation of the distribution, such opinions shall have been acceptable to CIT in form and substance in CIT's sole discretion, and such opinions shall not have been withdrawn or rescinded;

 

the U.S. Securities and Exchange Commission (the "SEC") shall have declared effective the registration statement of which this information statement forms a part, and this information statement shall have been made available to CIT stockholders;

 

all actions or filings necessary or appropriate under applicable U.S. federal, U.S. state or other securities laws shall have been taken and, where applicable, have become effective or been accepted by the applicable governmental entity;

 

the transaction agreements relating to the separation shall have been duly executed and delivered by the parties;

 

any required approval of the separation or distribution by the Board of Governors of the Federal Reserve System shall have been obtained and shall remain in full force and effect;

 

the incurrence of at least $[·] of new indebtedness by C2 and the determination by CIT in its sole discretion that as of the effective time of the distribution, it shall have no further liability under any of the C2 financing arrangements described under the section entitled "Description of Material Indebtedness," other than as expressly agreed between CIT and C2;

 

no order, injunction or decree issued by any court of competent jurisdiction, or other legal restraint or prohibition preventing the consummation of the separation, distribution or any of the related transactions, shall be in effect;

 

the shares of C2 common stock to be distributed shall have been approved for listing on the NYSE, subject to official notice of distribution; and

 

no other event or development shall exist or have occurred that, in the judgment of CIT's board of directors, in its sole discretion, makes it inadvisable to effect the separation, distribution and other related transactions.

3


 

 

CIT and C2 cannot assure you that any or all of the foregoing conditions will be met and CIT may also waive any of the conditions to the distribution. In addition, CIT can decline at any time to go forward with the separation and distribution. For a complete discussion of all of the conditions to the distribution, see "The Separation and Distribution—Conditions to the Distribution."

What is the expected date of completion of the distribution?

 

The completion and timing of the distribution are dependent upon a number of conditions. It is expected that the shares of C2 common stock will be distributed by CIT at 12:01 a.m., Eastern Time, on [·] to the holders of record of CIT common stock at the close of business on [·], the record date for the distribution. However, no assurance can be provided as to the timing of the distribution or that all conditions to the distribution will be met.

Can CIT decide to cancel the distribution of C2 common stock even if all of the conditions have been met?

 

Yes. The distribution is subject to the satisfaction or waiver of certain conditions. See the section entitled "The Separation and Distribution—Conditions to the Distribution." Until the distribution has occurred, CIT has the right to terminate the distribution, even if all of the conditions are satisfied. C2 is not aware of any known circumstances in which the distribution would be terminated at a time after the CIT board of directors has declared the distribution and all of the conditions to the distribution are satisfied, other than unexpected positive developments in CIT's exploration of a sale of its commercial aircraft leasing business that occur after the CIT board of directors has declared the distribution. Following the time at which the CIT board of directors has declared the distribution and all of the conditions to the distribution have been satisfied, such unexpected positive developments could include the emergence of a new bidder, or the receipt of an improved proposal from a potential acquiror with whom CIT has previously engaged in discussions. However, there are a number of risks related to C2's business and operations, the separation and our common stock, the realization of which could result in CIT determining not to proceed with the distribution. See Risk Factors beginning on page 24.

What if I want to sell my CIT common stock or my C2 common stock?

 

You should consult with your financial advisors, such as your stockbroker, bank or tax advisor.

4


 

What is "regular-way" and "ex-distribution" trading of CIT common stock?

 

Beginning on or shortly before the record date for the distribution and continuing up to and through the distribution date, it is expected that there will be two markets in CIT common stock: a "regular-way" market and an "ex-distribution" market. CIT common stock that trades in the "regular-way" market will trade with an entitlement to shares of C2 common stock distributed pursuant to the distribution. Shares that trade in the "ex-distribution" market will trade without an entitlement to shares of C2 common stock distributed pursuant to the distribution. If you hold shares of CIT common stock on the record date and then decide to sell any CIT common stock before the distribution date, you should make sure your stockbroker, bank or other nominee understands whether you want to sell your CIT common stock with or without your entitlement to C2 common stock pursuant to the distribution.

Where will I be able to trade shares of C2 common stock?

 

C2 intends to apply to list its common stock on the NYSE under the symbol "CTWO." C2 anticipates that trading in shares of its common stock will begin on a "when-issued" basis on or about [·], the record date for the distribution, and will continue up to and through the distribution date and that "regular-way" trading in C2 common stock will begin on the first trading day following the completion of the distribution. If trading begins on a "when-issued" basis, you may purchase or sell shares of C2 common stock up to and through the distribution date, but your transaction will not settle until after the distribution date. C2 cannot predict the trading prices for its common stock before, on or after the distribution date.

What will happen to the listing of CIT common stock?

 

CIT common stock will continue to trade on the NYSE after the distribution under the symbol "CIT."

Will the number of shares of CIT common stock that I own change as a result of the distribution?

 

No. The number of shares of CIT common stock that you own will not change as a result of the distribution.

Will the distribution affect the market price of my shares of CIT common stock?

 

Yes. As a result of the distribution, CIT expects the trading price of CIT common stock immediately following the distribution to be lower than the "regular-way" trading price of such stock immediately prior to the distribution because the trading price of CIT common stock will no longer reflect the value of the commercial aircraft leasing business. There can be no assurance that the aggregate market value of the CIT common stock and C2 common stock following the separation will be higher or lower than the market value of CIT common stock if the separation and distribution did not occur. This means, for example, that the combined trading prices of [·] shares of CIT common stock and one share of C2 common stock after the distribution may be equal to, greater than or less than the trading price of [·] shares of CIT common stock before the distribution.

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What are the material U.S. federal income tax consequences of the contribution and the distribution?

 

It is a condition to the completion of the distribution that CIT receive an opinion from outside tax counsel to the effect that the requirements for tax-free treatment under Section 355 of the Code should be satisfied. Accordingly, it is expected that no gain or loss will be recognized by CIT in connection with the contribution and distribution and, except with respect to cash received in lieu of a fractional share of C2 common stock, no gain or loss will be recognized by you, and no amount will be included in your income, upon the receipt of shares of C2 common stock in the distribution for U.S. federal income tax purposes. You will, however, recognize gain or loss for U.S. federal income tax purposes with respect to cash received in lieu of a fractional share of C2 common stock. For more information regarding the potential U.S. federal income tax consequences to C2 and to you of the contribution and the distribution, see the section entitled "Material U.S. Federal Income Tax Consequences."

How will I determine my tax basis in the C2 shares I receive in the distribution?

 

For U.S. federal income tax purposes, your aggregate basis in the common stock that you hold in CIT and the new C2 common stock received in the distribution (including any fractional share interest in C2 common stock for which cash is received) will equal the aggregate basis in CIT common stock held by you immediately before the distribution, allocated between your shares of CIT common stock and C2 common stock (including any fractional share interest in C2 common stock for which cash is received) you receive in the distribution in proportion to the relative fair market value of each on the distribution date. You should consult your tax advisor about the particular consequences of the distribution to you, including the application of the tax basis allocation rules and the application of state, local and non-U.S. tax laws.

What will C2's relationship be with CIT following the separation?

 

After the distribution, CIT and C2 will be separate companies with separate management teams and separate boards of directors. C2 will enter into a separation and distribution agreement with CIT to effect the separation and distribution and provide a framework for C2's relationship with CIT after the separation and will enter into certain other agreements, such as a transition services agreement, a tax matters agreement and an employee matters agreement. These agreements will provide for the separation between C2 and CIT of the assets, employees, liabilities and obligations (including investments, property and employee benefits and tax-related assets and liabilities) of CIT and its subsidiaries attributable to periods prior to, at and after C2's separation from CIT and will govern the relationship between C2 and CIT subsequent to the completion of the separation. For additional information regarding the separation and distribution agreement, other transaction agreements and certain other commercial agreements between CIT and C2, see the sections entitled "Risk Factors—Risks Related to the Separation" and "Relationship with CIT Following the Separation and Distribution."

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Who will manage C2 after the separation?

 

C2 will benefit from a management team with an extensive background in the commercial aircraft leasing business. Led by C. Jeffrey Knittel, who will be C2's CEO after the separation, C2's management team will possess deep knowledge of, and extensive experience in, its industry. For more information regarding C2's management, see the section entitled "Management."

Are there risks associated with owning C2 common stock?

 

Yes. Ownership of C2 common stock is subject to both general and specific risks relating to C2's business, the industry in which it operates, its ongoing contractual relationships with CIT and its status as a separate, publicly traded company. Ownership of C2 common stock is also subject to risks relating to the separation. These risks are described in the "Risk Factors" section of this information statement beginning on page 24. You are encouraged to read that section carefully.

Does C2 plan to pay dividends?

 

C2 currently anticipates that it will not initially pay a regular cash dividend. The declaration and payment of any dividends in the future by C2 will be at the sole discretion of its board of directors and will depend upon many factors. See the section entitled "Dividend Policy."

Will C2 incur any indebtedness prior to or at the time of the distribution?

 

Yes. C2 anticipates having approximately $[·] of outstanding indebtedness upon completion of the separation, and is targeting an equity to asset ratio of not less than [·]% following the recapitalization to be effectuated as part of the separation. See the sections entitled "Description of Material Indebtedness" and "Risk Factors—Risks Related to Our Business and Operations."

Who will be the distribution agent, transfer agent and registrar for C2 common stock?

 

The distribution agent, transfer agent and registrar for C2 common stock will be [·]. For questions relating to the transfer or mechanics of the stock distribution, you should contact [·] toll free at [·] or non-toll free at [·].

Where can I find more information about CIT and C2?

 

Before the distribution, if you have any questions relating to CIT's business performance, you should contact:

 

CIT Group Inc.
1 CIT Drive
Livingston, NJ 07039
Attention: Investor Relations

 

After the distribution, C2 stockholders who have any questions relating to C2's business performance should contact C2 at:

 

C2 Aviation Capital, Inc.
505 Fifth Avenue
New York, NY 10017
Attention: Investor Relations

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INFORMATION STATEMENT SUMMARY

        Except as otherwise indicated or unless the context otherwise requires, the information included in this information statement about C2 assumes the completion of all of the transactions referred to in this information statement in connection with the separation and distribution. Unless the context otherwise requires, references in this information statement to "C2," "we," "us," "our," or "the company" refer to C2 Aviation Capital, Inc., a Delaware corporation, and its combined subsidiaries. References in this information statement to "CIT" refer to CIT Group Inc., a Delaware corporation, and its consolidated subsidiaries (other than, after the distribution, C2 and its consolidated subsidiaries), unless the context otherwise requires. References to C2's historical business and operations refer to the business and operations of CIT's commercial aircraft leasing business that will be transferred to C2 in connection with the separation and distribution. References in this information statement to the "separation" refer to the separation of the commercial aircraft leasing business from CIT's other businesses and the creation, as a result of the distribution, of an independent, publicly traded company, C2, to hold the assets and liabilities associated with the commercial aircraft leasing business after the distribution. References in this information statement to the "distribution" refer to the distribution of all of C2's outstanding common stock to CIT's stockholders on a pro rata basis.


C2 Aviation Capital, Inc.

Overview

        C2 is a leading global aircraft leasing company focused on acquiring, leasing and managing commercial aircraft. We have been a provider of financial solutions in the commercial aircraft industry for over 40 years, including being among the first providers of operating leases to airlines over 20 years ago. Our strategy is to maintain and grow our diversified portfolio of widely-operated commercial aircraft in order to generate attractive risk-adjusted returns throughout aviation industry cycles. As we have built our business to scale over many years, we have developed deep and long-standing relationships with airlines and aircraft manufacturers, which we use to anticipate demand for aircraft models and to control credit and concentration risk.

        Our managed and on-order portfolio of 471 aircraft as of June 30, 2016, includes 307 aircraft we currently own ("owned" aircraft), 27 aircraft owned by third parties and serviced by us ("serviced" aircraft), 132 aircraft we have committed to purchase ("on-order" aircraft) and five loans we have made that are secured by commercial aircraft ("financed" aircraft). Our owned and serviced portfolio of 334 aircraft makes us one of the world's five largest aircraft lessors by aircraft count as of June 30, 2016, according to Ascend Flightglobal Consultancy ("Ascend"). The total aggregate net book value of our aircraft portfolio was approximately $11 billion as of June 30, 2016, including owned and financed aircraft with an aggregate net book value of approximately $10 billion and serviced aircraft with an aggregate net book value of approximately $1 billion in the two entities that comprise our strategic relationship with Century Tokyo Leasing ("CTL"). The average age of our owned portfolio, weighted by net book value, was 5.9 years as of June 30, 2016. For the year ended December 31, 2015 and the six months ended June 30, 2016, we reported total revenues of $1.19 billion and $641 million, respectively, and net income of $386 million and $140 million, respectively.

        We actively manage our owned portfolio to include aircraft that we believe have a large number of existing or expected airline operators. As of June 30, 2016, our owned portfolio consisted of narrowbody models, which include the Boeing 737 series and the Airbus A320 series, and which represent approximately 75% of our owned portfolio by aircraft count; select intermediate widebody aircraft, which include the Boeing 787 series and the Airbus A330 and A350 series, and which represent approximately 17% of our owned portfolio by aircraft count; and regional aircraft, which include the Embraer EJet 175 series and the Bombardier CRJ900, and which represent approximately 8% of our owned portfolio by aircraft count. For a more detailed description of the classes of aircraft

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in our portfolio, see the section entitled "Management's Discussion and Analysis of Financial Condition and Results of Operations." Our on-order portfolio as of June 30, 2016 includes 132 aircraft, of which 130 are next-generation Airbus A320neo, A321neo, A330neo, A350-900, and Boeing 737-MAX and 787 family aircraft, which we believe are attractive assets due to the new levels of operating efficiency they will deliver.

        We are a global business headquartered in New York. Through our regional offices in New York, Ft. Lauderdale, Dublin and Singapore, we maintain local connectivity with customers and capital providers in North America, Latin America, Europe and the Asia Pacific region, respectively. We have a corporate support center in Livingston, New Jersey, and small offices in Seattle, Washington and Toulouse, France, where we oversee the manufacturing process for new aircraft we order from Boeing and Airbus, respectively. As of June 30, 2016, our customer base comprised approximately 100 customers in 49 countries.

        We generally lease our aircraft pursuant to net operating leases that require the lessee to pay for maintenance, insurance, taxes and all other aircraft operating expenses during the lease term. As lessor, we receive the investment benefits from, and assume the residual risk of, the aircraft. We select aircraft that we believe have a large universe of existing or potential operators. As a result, we believe that our aircraft will retain a more predictable residual value, have increased marketability and will be less susceptible to asset impairment risk. As of June 30, 2016, 100% of our leases are payable in U.S. dollars, with lease rates on substantially all of our leases fixed for the term of the lease. A typical initial lease term for aircraft we purchase from manufacturers is between eight and twelve years, which provides a high level of predictability to revenues. As of June 30, 2016, the average lease term remaining on the leases in our owned portfolio, weighted by the net book value of the aircraft, was 6.6 years.

        Our business model provides flexibility to adjust to market conditions and manage risk to produce consistent long-term performance throughout aviation industry cycles. We use multiple aircraft acquisition channels to grow, maintaining a strong core book of direct orders from original equipment manufacturers ("OEMs") while opportunistically engaging in sale-leaseback and other secondary market acquisitions. We believe our deep industry relationships and commitment to multiple acquisition channels enable us to both source transactions that are not broadly available to other lessors and work with OEMs to develop and market aircraft that best fit our customers' needs. We seek to lease our aircraft over long time horizons to airlines across many geographies. We believe that this approach to business selection helps mitigate our counterparty and credit risk, provides a broad network through which we can source additional opportunities, and serves as a framework to optimize value at different points during the aviation industry cycle.

        We have participated since 2014 in a strategic relationship with CTL through two corporate entities and have grown the partnership to include 27 aircraft as of June 30, 2016. The strategic relationship enhances our ability to lease aircraft to airlines by combining our aircraft leasing and servicing expertise and origination and marketing capabilities with CTL's knowledge and efficient capital. In addition, because we are paid a servicing fee to manage the assets owned by these entities, we generate fee income through the strategic relationship.

        We seek to proactively manage our portfolio in response to market conditions. We sell assets both to aircraft investors globally, with whom we maintain relationships, as well as to airline customers and other operating lessors. Aircraft sales facilitate management of portfolio concentrations (including allowing us to maintain a young fleet), provide ongoing liquidity in the portfolio, enable us to monetize value in our aircraft and are an effective tool for managing both asset residual value and lease remarketing risk. These portfolio management strategies have historically been successful in mitigating risk, and we have consistently reported net gains on sales of assets.

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        To manage risks associated with our business, we have developed a comprehensive risk management platform that uses proprietary asset valuation systems and credit scoring processes. These systems, tools and models, combined with formal risk committees that meet regularly, inform our decision-making process. We seek to mitigate asset, credit and liability risks associated with owning and leasing aircraft through:

    diversification across geographies, aircraft technologies, airline business models and customers, with a particular focus on aviation industry trends affecting individual markets;

    a select investment focus on marketable aircraft types with deep bases of existing and potential operators;

    a consistent approach of entering into longer-term leases with airlines;

    management of the overall timing of lease and debt maturities;

    utilization of our technical expertise to order aircraft that are desirable to a broad universe of customers, ensure end-of-lease returns are in proper condition, and minimize downtime and cost associated with transitioning aircraft among lessees;

    management of funding to minimize exposure to interest rate risk, distribute debt maturities and match funding to new aircraft commitments; and

    a comprehensive risk management framework.

        This combination of asset selection and robust risk management has contributed to above 99% average fleet utilization over the last three fiscal years.

        Our highly experienced executive leadership team is led by our CEO, C. Jeffrey Knittel, and our President, Anthony Diaz. Our senior leadership team has an average of over 18 years of experience in the aircraft leasing industry, covering several industry cycles, and deep and long-standing customer, lender, investor and OEM relationships.

Portfolio

        As of June 30, 2016, our managed and on-order portfolio consisted of 471 aircraft. Our managed portfolio includes 307 owned aircraft, 27 serviced aircraft and five financed aircraft. The serviced aircraft are serviced through our strategic relationship with CTL. Our owned portfolio of 307 aircraft, as of June 30, 2016, included 52 intermediate widebody aircraft, 229 narrowbody aircraft and 26 regional jets. The average age of our owned portfolio, weighted by net book value, is 5.9 years as of June 30, 2016.

        As of June 30, 2016, we have committed to acquire a total of 132 aircraft directly from Airbus and Boeing with a capital commitment of approximately $9.2 billion and with scheduled delivery dates through 2020. Our on-order portfolio as of June 30, 2016 includes 130 next-generation A320neo, A321neo, A330neo, A350-900, 737-MAX, and 787 family of aircraft.

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        As of June 30, 2016, our owned and on-order portfolios consisted of the following aircraft, for which we have, or upon delivery will have, the risks and benefits of asset ownership:

Manufacturer
  Aircraft Type   Owned
Portfolio
  On-Order
Portfolio
  Total  

Narrowbody

                       

Airbus

  A319-100     28         28  

Airbus

  A320-200     60         60  

Airbus

  A321ceo     31     2     33  

Airbus

  A320/321neo         50     50  

Boeing

  737-800     54         54  

Boeing

  737 MAX 8         37     37  

Boeing

  737-900ER     17         17  

Boeing

  737-700     15         15  

Boeing

  757-200     8         8  

Embraer

  E190     10         10  

Embraer

  E195     6         6  

Intermediate Widebody

 

 

   
 
   
 
   
 
 

Airbus

  A330-200     25         25  

Airbus

  A330-300     15         15  

Airbus

  A330-900neo         15     15  

Airbus

  A350-900     2     12     14  

Boeing

  787-8     4         4  

Boeing

  787-9         16     16  

Boeing

  767-300ER     6         6  

Widebody

 

   
   
   
 

Regional

 

 

   
 
   
 
   
 
 

Bombardier

  CRJ 900     14         14  

Embraer

  E175     4         4  

Other

    8         8  

TOTAL

    307     132     439  

        The following table sets forth the scheduled delivery dates for our on-order portfolio as of June 30, 2016:

Manufacturer
  Model   Remainder
of
2016
  2017   2018   2019   2020   Total  

Airbus

  A321ceo     2                     2  

Airbus

  A320/321neo     1     13     25     11         50  

Airbus

  A330-900neo             5     4     6     15  

Airbus

  A350-900     2             3     7     12  

Boeing

  737 MAX 8                 20     17     37  

Boeing

  787-9         3     5     6     2     16  

Total

    5     16     35     44     32     132  

Leases and Lessees

        Our top five lessees by percentage of lease revenue for the year ended December 31, 2015 were American Airlines, Inc., Delta Airlines, Inc., Garuda Indonesia, Qantas Airways Limited and Virgin

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Blue Airlines Pty Limited. Individually, none exceeded 8% of our revenues and collectively, our top five lessees accounted for approximately 26% of our revenues in 2015.

        We benefit from a diverse customer base with a broad geographic distribution. The following chart sets forth the distribution of our lessees by location of each lessee airline's principal place of business as of June 30, 2016, measured by net book value:

 
  (% net
book value)
 

Asia / Pacific

    39 %

U.S. and Canada

    24 %

Europe

    20 %

Latin America

    11 %

Africa / Middle East

    6 %

Total

    100 %

        The expiry of our leases is well distributed over time, with no more than 16% of our leases, measured by aircraft count, expiring in any single year. The following chart sets forth as of June 30, 2016, the number of leases that were scheduled to expire each year by aircraft count:

Year
  Number of aircraft
with leases expiring
 

Remainder of 2016

    14  

2017

    27  

2018

    30  

2019

    33  

2020

    49  

Thereafter

    154  

Total

    307  

        Though we work closely with potential lessees and, where appropriate, develop innovative lease structures tailored to address their specific needs, most of our leases share some common characteristics, including the following:

    fixed lease terms;

    monthly payment in advance, which must be paid under all circumstances, including during periods in which an aircraft is not in operation due to maintenance or grounding;

    absolute and unconditional payment obligations by the lessee, which are not subject to deduction for any withholding, set-off, counterclaim, recoupment, defense or other right the lessee may have against us;

    indemnification obligations requiring lessees to indemnify us for certain tax liabilities relating to the leases and the aircraft, including value-added tax, other than withholdings that arise out of transfers of the aircraft to or by us, due to our corporate structure or due to our gross negligence;

    security deposits, maintenance reserves, return conditions, and other mechanisms to protect the contracted revenue and value of our portfolio;

    obligations that lessees pay for all maintenance, insurance, and other aircraft operational expenses during the lease term; and

    rental rate adjustments based on movements in market rates from contract signing to delivery.

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        Lessees are responsible for compliance with applicable laws and regulations with respect to the aircraft. Leases also typically contain extensive provisions regarding our remedies and rights in the event of a default by a lessee.

Competitive Strengths

        We believe we enjoy the benefits of a number of talents and assets, many of which have been developed over our history as an established industry leader.

        Top-five lessor, optimally balancing industry relevance and flexibility.    Our owned and serviced portfolio of 334 aircraft makes us one of the world's five largest aircraft lessors by aircraft count as of June 30, 2016, according to Ascend. We believe this position offers several advantages. On the one hand, we have sufficient size to engage in larger-scale transactions with both manufacturers and airlines, allowing us to purchase large and diverse portfolios of aircraft, source transactions that are not broadly available, and influence aircraft design standards. On the other hand, relative to the largest lessors, we are sufficiently nimble to quickly adjust to market conditions, manage risk throughout aviation industry cycles, maintain a young fleet, and diversify our exposures by customer, geography, OEM and aircraft type.

        In addition, we believe our size makes us influential to key external constituencies, including manufacturers, airlines and capital market participants. We have been placing direct orders with manufacturers for new aircraft since 1999. We have a history of engaging in strategic transactions with manufacturers, including serving as one of the launch customers of the A350, A320neo, A330neo, 787 and 737-MAX. Meanwhile, we have been a valued sale-leaseback buyer-lessor counterparty to airlines due to our willingness to participate in, and our ability to commit quickly to, large portfolio transactions, such as our 2014 sale-leaseback transaction in which we acquired 24 new aircraft from Delta.

        Diverse fleet of modern, widely-operated aircraft.    As of June 30, 2016, our owned fleet of 307 aircraft was comprised, by aircraft count, of 75% narrowbody models, 17% intermediate widebody models and 8% regional jet models. The average age of our owned portfolio, weighted by net book value, was 5.9 years, as of June 30, 2016. Our portfolio is structured to focus on aircraft models that have deep operator bases. For example, 737 family and A320 family aircraft are operated by a combined total of 632 passenger operators globally, as of June 30, 2016, according to Ascend. Consistent with our strategy of owning the most in-demand aircraft, these models comprise 67% of our owned portfolio as of June 30, 2016. We believe our focus on owning a modern, widely-operated portfolio makes our aircraft attractive to airlines and readily deployable at minimal expense into markets around the world and strengthens our ability to re-lease and sell aircraft at each stage of their useful lives.

        Deep, long-standing and valuable industry relationships.    As a result of our legacy of over 40 years of experience in aircraft financing, we have built relationships that have endured through all types of market conditions with both OEMs and our approximately 100 customers in 49 countries as of June 30, 2016.

        We believe our relationships provide us access to key decision makers at airframe and engine manufacturers and major airlines around the world, thereby enabling us to make prompt acquisitions of new aircraft, enter into new leases, and anticipate airlines' longer-term trajectories so as to tailor our fleet and leases to their specific needs. Additionally, we believe our relationships with airframe and engine manufacturers allow us to provide input into their airframe and engine designs to better meet the needs of our airline customers, which in turn enables us to assist those manufacturers in growing their customer bases.

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        In addition, we believe our airline relationships give us access to sourcing and leasing opportunities across the globe and throughout the aviation industry cycle. Our 2014 sale-leaseback transaction in which we acquired 24 new aircraft from Delta is just one example of the benefits of these relationships with our customers. Our relationships are similarly strong with OEMs. We have a long history of helping OEMs expand their businesses by placing OEM aircraft with airline customers who have never before operated such aircraft. We believe that the value we add for both airlines and OEMs will continue to reinforce these relationships.

        We expect that the aircraft leasing industry will continue to be relationship-driven, and airframe and engine manufacturers and our airline customers will continue to place a high value on the expertise and experience of our management team, which we believe will help us develop new relationships. At the same time, we plan to use our long-standing contacts to grow our business and continue to add value to both manufacturers and customers. We believe these relationships will help us maintain our leadership position in the aircraft leasing industry over time.

        Strong aircraft delivery pipeline.    Through our strategic and opportunistic approaches to acquiring aircraft and our strong relationship with airframe manufacturers, as of June 30, 2016, we have an on-order portfolio of 132 aircraft to be delivered through 2020, 130 of which are next-generation aircraft. We believe that our strong aircraft delivery pipeline over this period gives us the ability to provide airline customers with a comprehensive multiyear solution to their aircraft leasing and fleet needs. We believe this ability is a competitive advantage in developing, renewing and expanding customer relationships as we have new aircraft available for delivery during periods far earlier than most of our airline customers can obtain new aircraft directly from airframe and engine manufacturers.

        Long-standing business and highly experienced and proven management team with deep aviation and financial institution experience.    Our senior leadership team is led by CEO C. Jeffrey Knittel and President Anthony Diaz, each of whom has over 30 years of experience in the aircraft leasing industry, covering several industry cycles, and deep, long-standing customer, lender, investor and OEM relationships. Our team has been instrumental in building CIT's long-standing commercial air business into one of the largest aircraft lessors in the industry over the nearly 20 years that certain members of our senior management team have been together in various capacities.

Strategy

        Our objective is to build and maintain a balanced and diverse portfolio of attractive commercial aircraft while leveraging our industry relationships and successfully managing our credit and financing risk to deliver attractive risk-adjusted returns throughout aviation industry cycles. Key elements of our strategy to achieve these objectives are as follows:

        Maintain our leadership position in the aircraft leasing marketplace via steady investment into in-demand, modern and widely-operated aircraft.    Our investment strategy is focused on acquiring a fleet of aircraft with strategically diverse technology, capacity and flight capability characteristics that will remain in strong demand throughout industry cycles. Industry experts predict continued growth of the proportion of commercial aircraft under operating leases, and we believe that these favorable industry dynamics present a significant growth opportunity. Yet, we understand the cyclical nature of the aviation industry, and believe that consistent growth drives long-term performance across cycles. Our experience demonstrates that aircraft with a large universe of potential operators have strong long-term value retention characteristics and lower re-marketing risks. We plan to own aircraft that our customers can lease and operate without major upfront costs or significant deviations from their strategic goals. We believe that steadily growing a diverse and in-demand portfolio will enable us to generate stable cash flows over the long term through high utilization rates on attractive lease terms.

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        Leverage multiple aircraft procurement channels to optimize growth and performance through the aviation industry cycle.    We intend to continue to utilize multiple procurement channels to source aircraft. We plan to supplement our core acquisition strategy of direct orders from aircraft OEMs, which we believe will provide us with consistent growth, with select sale-leaseback transactions with airlines and opportunistic acquisitions from other lessors or financial institutions. We believe that the utilization of multiple aircraft procurement channels will provide us the flexibility to enhance our portfolio and performance through the cycle as each channel, to a varying degree, can be calibrated to react to, and increase opportunity from, prevailing market conditions.

        Direct Orders from Manufacturers.    As of June 30, 2016, we committed to acquire a total of 132 aircraft directly from Airbus and Boeing, representing all of our on-order portfolio as of that date. Our entire on-order portfolio scheduled for delivery in 2017 or later consists of next-generation aircraft. As of June 30, 2016, our orders include 2 A321ceo, 50 A320/321neo, 15 A330neo, 12 A350-900, 37 737 MAX and 16 787 family aircraft, which are scheduled for delivery between 2016 and 2020. We believe these orders are strategically important as they give us access to highly sought-after, current- and next-generation, fuel-efficient aircraft. We anticipate strong leasing demand from airlines over the course of the useful lives of these aircraft due to their broad appeal. We believe these delivery positions are attractively timed and have the potential to generate significant franchise value. Direct order acquisitions typically require significantly longer lead times than sale-leaseback transactions, generally ranging from four to eight years from the time of order to the scheduled delivery of the aircraft, and require us to make pre-delivery payments.

        Sale-Leaseback.    We opportunistically engage in sale-leaseback transactions as an acquirer when we believe the terms to be advantageous. Under this transaction structure, we commit to acquire either new aircraft that an airline has ordered directly from the OEM, or aircraft already in service, and lease the aircraft to the airline. The sale-leaseback channel provides us with flexibility to manage cycle risk and be responsive to market opportunities and conditions—allowing us to quickly align our portfolio with strategic growth areas and improve credit quality in anticipation of downward cycles. Sale-leaseback transactions are generally completed within nine to eighteen months from the date on which the contract is signed until the scheduled delivery of the aircraft. These transactions, which can range in size from single-aircraft acquisitions to large portfolios, allow us to grow our portfolio and add next-generation technology with limited risk in light of a known, committed lessee. They may also enable us to quickly execute strategic goals in response to changing market dynamics, such as increasing our exposure to stronger credit U.S. carriers whose credit quality is improving faster than carriers in other geographies due to consolidation. Further, such sale-leaseback portfolio transactions open up the possibility of "add-on" acquisitions of individual aircraft by reducing friction costs such that sellers may choose to engage with us exclusively rather than running a market-wide bidding process. As of June 30, 2016, we did not have any commitments to acquire aircraft through sale-leaseback transactions.

        Actively manage our lease portfolio to optimize returns and minimize risk through diversification.    In actively managing our aircraft portfolio, we seek to optimize returns and minimize risks by appropriately and prudently diversifying the types of aircraft we acquire, spreading out over a number of years the termination dates for our leases, achieving geographic diversification, and minimizing our exposure to customer concentration. Through our acquisition of desirable aircraft types with large sets of potential operators, we seek to maximize the mobility of our assets across global markets, which may allow us to achieve a high rate of lease placements on attractive lease terms. Our commitment to proactively selling aircraft facilitates management of our portfolio concentrations by providing ongoing liquidity, and managing asset residual value and lease remarketing risk. We have expertise across multiple disposition channels, including structured portfolio sales. We leverage our marketing expertise to add value throughout the sale process, as the majority of our historical sales have included an already signed lease with an operator, enabling us to realize better outcomes. Through the implementation of our diversification and sales strategies, we believe that we will be in a position to

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reduce our exposure to industry fluctuations over a particular period of time, economic fluctuations in a particular regional market, changes in customer preferences for particular aircraft, and the credit risk posed by a particular customer.

        Effectively manage risk over the long-term.    We aim to mitigate risk through aviation industry cycles by maintaining a diverse customer base and applying our proprietary risk management models, processes and expertise as we continuously evaluate our portfolio. With approximately 100 customers geographically distributed across 49 countries and, as of June 30, 2016, no single lessee accounting for more than 8% of our 2015 lease revenue, our business model mitigates the risk posed by the deteriorating credit of any individual customer or economic fluctuations in any particular regional market. Our diversity of aircraft types, focus on in-demand models, staggering of lease terms and matched financing reduce the risks posed by changes in preferences for particular aircraft and periodic downturns in lessee demand or broader financing markets. It is our practice to index new aircraft placements to swap rates, so that the lease rate will change in accord with interest rates until it is fixed upon delivery of the aircraft. We believe this practice helps to neutralize the effect of interest rate fluctuations on both us and the lessee during the lag time between aircraft placement and commencement of the lease upon aircraft delivery. Our experienced team uses proprietary analytical systems and credit scoring processes to forecast and identify credit and liability risks. Regular meetings between our risk group and members of other functional teams allow us to detect potentially problematic leases in advance of defaults. Our historical experience indicates that our philosophy of negotiating workouts as early as possible upon recognition of possible credit issues saves costs and mitigates risk. Because the majority of the aircraft in our fleet are models that are in demand, we are typically able to re-lease recovered assets quickly and avoid significant losses. We believe that these risk management practices will help drive our ability to deliver long-term returns.

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Summary of Risk Factors

        Ownership of our common stock is subject to a number of risks, including risks relating to our business and operations, the separation and our common stock. Set forth below are some, but not all, of these risks. Please read the information in the section entitled "Risk Factors" for a more thorough description of these and other risks.

Risks Related to Our Business and Operations

    Our financial condition and results of operations are dependent, in part, on the financial strength of our lessees; lessee defaults, bankruptcies and other credit problems could have a material adverse effect on our financial condition, cash flow and results of operations.

    We will need additional capital to finance our aircraft purchase obligations and refinance any existing debt, and we may not be able to obtain it on acceptable terms, or at all, which may limit our ability to grow and compete in the commercial aircraft leasing market.

    Changes in the credit environment may materially affect our future access to capital.

    The value of the aircraft and engines we own or acquire and the market rates for leases could decline, which could materially and adversely affect our financial condition, cash flow and results of operations.

    Failing to retain and/or attract skilled employees could materially and adversely affect our business.

    From time to time, the aircraft industry has experienced periods of oversupply during which lease rates and aircraft values have declined, and any future oversupply could have a material adverse effect on our financial condition, cash flow and results of operations.

    Changes in interest rates may materially and adversely affect our financial condition and results of operations.

    Competition from other aircraft lessors or purchasers could have a material adverse effect on our cash flow and results of operations.

    The number of aircraft and engine manufacturers is limited and the failure of any manufacturer to meet its obligations could have a material adverse effect on our financial condition, cash flow and results of operations.

    The introduction of superior aircraft technology or a new line of aircraft or engines could cause the aircraft that we own or acquire to become outdated or obsolete or oversupplied and therefore less desirable, which could have a material adverse effect on our financial condition, cash flow and results of operations.

    Our aircraft may not at all times be adequately insured either as a result of lessees failing to maintain sufficient insurance during the course of a lease or insurers not being willing to cover certain risks, which could have a material adverse effect on our financial condition.

    Terrorist attacks, cyber-attacks or the fear of such attacks, even if not made directly on the airline industry, and unfavorable geopolitical conditions could negatively affect lessees and the airline industry, which could have a material adverse effect on our financial condition, cash flow and results of operations.

    We are subject to various risks and requirements associated with transacting business in foreign countries.

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    The effects of various environmental laws and regulations may negatively affect the airline industry, which may in turn have a material adverse effect on our financial condition, cash flow and results of operations.

    We may be indirectly subject to global economic and political risks, including those associated with emerging markets and the British referendum to exit the European Union, which could have a material adverse effect on our financial condition, cash flow and results of operations.

    The terms of our indebtedness or any indebtedness we incur in connection with the separation or in the future may restrict our operations, particularly our ability to respond to changes or to take certain actions.

    Our expected level of indebtedness and existing and future purchase commitments will require significant debt service and pre-delivery payments.

Risks Related to the Separation

    We have no history of operating as an independent company, and our historical and pro forma financial information is not necessarily representative of the results that we would have achieved as a separate, publicly traded company and may not be a reliable indicator of our future results.

    There could be significant liability if the distribution is determined to be a taxable transaction.

    Until the separation and distribution occur, CIT has sole discretion to change the terms of the separation and distribution in ways that may be unfavorable to us.

    We may not achieve some or all of the expected benefits of the separation, the separation may materially and adversely affect our business, and we may not be able to execute on our business plan and strategy following the separation.

    CIT may fail to perform under various transaction agreements that will be executed as part of the separation or we may fail to have necessary systems and services in place when certain of the transaction agreements expire.

Risks Related to Our Common Stock

    No market currently exists for our common stock and we cannot be certain that an active trading market for our common stock will develop or be sustained after the distribution, and following the distribution, our stock price may fluctuate significantly.

    There may be substantial changes in our stockholder base.

    We cannot guarantee the timing, amount or payment of dividends on our common stock, if any, now or in the future.

    Certain provisions in our amended and restated certificate of incorporation and bylaws, and of Delaware law, may prevent or delay an acquisition of the company, which could decrease the trading price of our common stock.


The Separation and Distribution

        On October 23, 2015, CIT announced that it would explore strategic alternatives for its commercial aircraft leasing business. On December 9, 2015, CIT management stated that CIT would pursue a dual-track process that would include exploring both a sale of the business and a tax-free spin-off to effect the separation, and reaffirmed its commitment to this process in a March 23, 2016 presentation to investors.

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        On [    ·    ], the CIT board of directors determined to effect the separation by means of a pro rata distribution to CIT stockholders of all the outstanding shares of common stock of C2, which was formed to hold CIT's commercial aircraft leasing business. The board approved the distribution of all of C2's issued and outstanding shares of common stock on the basis of one share of C2 common stock for every [    ·    ] shares of CIT common stock held at the close of business on [    ·    ], the record date for the distribution, subject to the satisfaction or waiver of the conditions to the distribution as described in this information statement. For a more detailed description of these conditions, see the section entitled "The Separation and Distribution—Conditions to the Distribution."

C2's Post-Separation Relationship with CIT

        After the distribution, CIT and C2 will be separate companies with separate management teams and separate boards of directors. C2 will enter into a separation and distribution agreement with CIT, which is referred to in this information statement as the "separation agreement" or the "separation and distribution agreement." In connection with the separation, C2 will also enter into various other agreements to effect the separation and provide a framework for its relationship with CIT after the separation, such as a transition services agreement, a tax matters agreement and an employee matters agreement. These agreements will provide for the allocation between C2 and CIT of CIT's assets, employees, liabilities and obligations (including its investments, property and employee benefits and tax-related assets and liabilities) attributable to periods prior to, at and after C2's separation from CIT, and will govern certain relationships between C2 and CIT after the separation. Forms of these agreements have been or will be filed as exhibits to the registration statement on Form 10 of which this information statement is a part. For additional information regarding the separation agreement and other transaction agreements and the transactions contemplated thereby, see the sections entitled "Risk Factors—Risks Related to the Separation," "The Separation and Distribution" and "Relationship with CIT Following the Separation and Distribution."

Reasons for the Separation

        The CIT Board of Directors believes that separating the commercial aircraft leasing business from the remaining businesses of CIT is in the best interests of CIT and its stockholders for a number of reasons, including:

    Enhanced transparency and a distinct investment identity for each of CIT and C2.  The separation will allow investors to separately value CIT and C2 based on their distinct investment identities, enhancing investor transparency and better highlighting the attributes of both companies. C2's commercial aircraft leasing business differs from CIT's commercial banking, consumer and community banking, and other transportation finance businesses in several respects, such as the duration and structure of assets, sources of financing, credit characteristics of customers, concentration of portfolio and geographic footprint. In addition, investors and analysts often apply different valuation methodologies to the two businesses. The separation will enable investors to evaluate the merits, strategy, performance, and future prospects of each company's respective business relative to its peers and to invest in each company separately based on these distinct characteristics. The separation may attract new investors whose investment strategies call for a more concentrated exposure to either the commercial aircraft leasing business or CIT's other businesses.

    Enhanced strategic and management focus.  The separation will allow C2 and CIT to more effectively pursue their distinct operating priorities and strategies and enable management of both companies to focus on their respective opportunities for long-term growth and profitability. C2's management will be able to focus on its commercial aircraft leasing business, while the management of CIT will be dedicated to growing its commercial banking, consumer and community banking, and other transportation finance businesses.

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    Creation of a more efficient holder of aircraft assets.  CIT is a financial holding company with a national bank subsidiary, and therefore it and its subsidiaries are subject to regulation from several governmental authorities, including the Board of Governors of the Federal Reserve System and the Federal Reserve Bank of New York. As a result, CIT is subject to certain limitations on its activities, transactions with affiliates and payment of dividends, and certain standards for capital and liquidity, safety and soundness and incentive compensation. In particular, because C2's aircraft order book is recognized as an off-balance sheet commitment and CIT, as a financial holding company, must hold capital against these future deliveries, depending on the size of the order book, CIT's return on equity and financial performance could potentially be reduced relative to aircraft leasing peers. Following the separation, C2, which will not be a bank holding company or financial holding company, will no longer be subject to many of these capital and regulatory requirements, enabling it to establish a capital structure tailored to the needs of the commercial aircraft leasing business and to deploy capital more effectively, and CIT will significantly reduce its non-earning off-balance sheet commitments.

    Access to capital markets to support growth.  The separation will create an independent capital structure that will afford C2 direct access to both equity and debt markets and will facilitate C2's ability to effect future acquisitions of aircraft assets. As a result, C2 will generally have more flexibility to capitalize on its growth opportunities.

    Alignment of incentives with performance objectives.  The separation will facilitate incentive compensation arrangements for employees more directly tied to the performance of the relevant company's business, and enhance employee hiring and retention by, among other things, improving the alignment of management and employee incentives with performance and growth objectives.

    Preservation of CIT's NOLs.  Unlike other separation alternatives, including a sale, a spin-off of CIT's commercial aircraft business is expected to allow CIT to preserve its net operating loss carry forwards ("NOLs"), which are available to offset future CIT taxable income and gains.

        The CIT Board of Directors also considered a number of potentially negative factors in evaluating the separation, including, among others, the potential loss of synergies, dedication of resources to replicate certain technology applications and infrastructure, time and effort required to be dedicated to this transaction by the management of CIT and C2 and the potential diversion of their attention away from their respective businesses, the types of increased costs that would result from operating C2 as a separate public entity (such as those relating to an independent board of directors, compliance with regulatory and stock exchange requirements and increased fees for financial auditing, insurance coverage and tax compliance), the types of one-time costs that would be incurred in effectuating the separation (such as investment banking and other professional service fees, asset transfer and liability management costs, and expenses related to the establishment of separate facilities, systems and operations and an independent board of directors), and the risk of not realizing the anticipated benefits of the separation and limitations placed on C2 as a result of the tax matters agreement, but concluded that the potential benefits of the separation significantly outweighed these factors. For additional information, see the section entitled "Risk Factors."

Corporate Information

        C2 was incorporated in Delaware on June 1, 2016 for the purpose of holding CIT's commercial aircraft leasing business in connection with the separation and distribution described herein. The address of C2's principal executive offices is 11 West 42nd Street, New York, New York 10036. C2's telephone number after the distribution will be [    ·    ]. C2 maintains an Internet site at [    ·    ]. C2's website and the information contained therein or connected thereto shall not be deemed to be

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incorporated herein, and you should not rely on any such information in making an investment decision.

Reason for Furnishing this Information Statement

        This information statement is being furnished solely to provide information to stockholders of CIT who will receive shares of C2 common stock in the distribution. It is not, and is not to be construed as, an inducement or encouragement to buy or sell any of C2's securities. The information contained in this information statement is believed by C2 to be accurate as of the date set forth on the cover of this information statement. Changes may occur after that date, and neither CIT nor C2 will update the information except in the normal course of their respective disclosure obligations and practices, or as required by applicable law.

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Summary Historical Combined Financial Data

        The following summary financial data reflects the combined operations of C2. We derived the summary historical combined income statement data for the six months ended June 30, 2016 and June 30, 2015, and the years ended December 31, 2015, December 31, 2014 and December 31, 2013, and combined balance sheet data as of June 30, 2016, December 31, 2015 and, December 31, 2014, as set forth below, from our unaudited Interim Condensed Combined Financial Statements and audited Annual Combined Financial Statements (together, the "Combined Financial Statements"), which are included in the "Index to Financial Statements" section of this information statement. We derived the summary combined balance sheet data as of June 30, 2015, December 31, 2013, December 31, 2012 and December 31, 2011 and the summary combined income statement data for the years ended December 31, 2012 and December 31, 2011 from our unaudited underlying financial records which are not included in this information statement. Our underlying financial records were derived from the financial records of CIT for the periods reflected herein. As a result, the historical results may not necessarily reflect our results of operations, financial position and cash flows for future periods or what they would have been had we been a separate, stand-alone company during the periods presented. To ensure a full understanding of this summary financial data, the information presented below should be reviewed in combination with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the Combined Financial Statements and accompanying notes thereto included elsewhere in this information statement.

        This summary historical combined financial data should be reviewed in combination with "Unaudited Pro Forma Combined Financial Statements," "Capitalization," "Selected Historical Combined Financial Data," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the Combined Financial Statements and accompanying notes included in this information statement.


Selected Combined Financial Data

 
  Six months
ended June 30,
  Year ended December 31,  
Select Data
(dollars in thousands)

  2016
(Unaudited)
  2015
(Unaudited)
  2015   2014   2013   2012
(Unaudited)
  2011
(Unaudited)
 

Summary of Income:

                                           

Revenues

                                           

Lease rental revenue, net

  $ 611,989   $ 551,957   $ 1,119,830   $ 1,132,224   $ 1,033,438   $ 1,076,922   $ 992,508  

Other revenue(1)

  $ 29,136   $ 45,042   $ 70,375   $ 71,118   $ 72,848   $ 81,958   $ 119,627  

Total Revenues

  $ 641,125   $ 596,999   $ 1,190,205   $ 1,203,342   $ 1,106,286   $ 1,158,880   $ 1,112,135  

Expenses

   
 
   
 
   
 
   
 
   
 
   
 
   
 
 

Depreciation on flight equipment

  $ 222,314   $ 196,643   $ 397,832   $ 374,497   $ 321,347   $ 302,201   $ 264,030  

Total Expenses

  $ 491,706   $ 444,943   $ 902,074   $ 822,880   $ 784,066   $ 1,345,478   $ 1,100,565  

Total Pre-Tax Income (Loss)(2)

  $ 157,689   $ 158,380   $ 300,404   $ 388,197   $ 331,990   $ (196,511 ) $ (15,702 )

Net income (loss)

  $ 139,516   $ 144,515   $ 385,662   $ 361,845   $ 300,258   $ (223,021 ) $ (57,287 )

Financial Position at Period End:

   
 
   
 
   
 
   
 
   
 
   
 
   
 
 

Total cash and cash equivalents(3)

  $ 668,399   $ 697,462   $ 649,110   $ 964,509   $ 675,733   $ 569,766   $ 453,309  

Finance leases and loans, net of allowance for credit losses

  $ 344,833   $ 383,274   $ 365,508   $ 401,043   $ 158,150   $ 314,536   $ 409,286  

Total flight equipment(4)

  $ 9,778,351   $ 9,030,711   $ 9,769,443   $ 9,309,292   $ 8,379,337   $ 8,238,759   $ 8,242,637  

Total Portfolio Assets

  $ 10,123,184   $ 9,413,985   $ 10,134,951   $ 9,710,335   $ 8,537,487   $ 8,553,295   $ 8,651,923  

Total Assets

  $ 11,948,455   $ 11,117,710   $ 11,804,725   $ 11,568,307   $ 10,188,315   $ 9,901,491   $ 9,749,713  

Total borrowings(5)

  $ 3,486,456   $ 3,141,453   $ 3,592,114   $ 3,666,226   $ 3,294,697   $ 3,090,951   $ 2,506,419  

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  Six months
ended June 30,
  Year ended December 31,  
Select Data
(dollars in thousands)

  2016
(Unaudited)
  2015
(Unaudited)
  2015   2014   2013   2012
(Unaudited)
  2011
(Unaudited)
 

Total Parent Company Net Investment

  $ 6,916,156   $ 6,505,872   $ 6,698,081   $ 6,439,532   $ 5,474,410   $ 5,429,072   $ 5,959,759  

Other:

   
 
   
 
   
 
   
 
   
 
   
 
   
 
 

Number of aircraft owned

    307     293     305     300     278     278     276  

Number of aircraft on order

    132     151     139     152     147     161     162  

Return on Assets(6)

    2.35 %   2.56 %   3.30 %   3.33 %   2.99 %   (2.27 )%   (0.62 )%

(1)
Other revenue is comprised of Finance lease and interest revenue, net, Gain on disposal of flight equipment, net and Other revenue as presented on the Combined Statements of Income.

(2)
Total Pre-tax Income (Loss) is calculated as Income before income taxes and income of investments accounted for under the equity method plus Share of earnings (loss) from unconsolidated equity method investment, net of tax, as presented on the Combined Statements of Income.

(3)
Total cash and cash equivalents is comprised of Cash and cash equivalents and Restricted cash and cash equivalents as presented on the Combined Balance Sheets.

(4)
Total flight equipment is comprised of Flight equipment held for operating leases, net of accumulated depreciation and Flight equipment held for sale as presented on the Combined Balance Sheets.

(5)
Total borrowings is comprised of Borrowings from secured financing, net of debt issuance costs and Notes payable to related parties as presented on the Combined Balance Sheets.

(6)
Return on Assets ("ROA") is calculated as Net income (loss) divided by average Total Assets as presented on the Combined Statements of Income and Combined Balance Sheets, respectively. The Net Income figures for the six months ended June 30, 2016 and 2015 have been annualized for the purposes of this calculation.

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RISK FACTORS

        The operation of our business and the economic and regulatory climate in the United States and other regions of the world involve various elements of risk and uncertainty. You should carefully consider the following risks and other information in this information statement in evaluating the company and our common stock. Any of the following risks, and additional risks that are presently unknown to us or that we currently deem immaterial, could materially and adversely affect our business, financial condition or results of operations. The risk factors generally have been separated into three groups: risks related to our business and operations, risks related to the separation and risks related to our common stock.

Risks Related to Our Business and Operations

Our business is affected by general economic and financial conditions.

        Our business and results of operations are significantly affected by general business, financial market and economic conditions. The worsening of economic conditions, particularly if combined with high fuel prices, may have a material adverse effect on our lessees' ability to meet their financial and other obligations under our operating leases, which, if our lessees default on their obligations to us or seek to renegotiate the terms of their leases, could have a material adverse effect on our financial condition, cash flow and results of operations. General business and economic conditions that could affect us include interest rate or foreign exchange rate fluctuations, inflation, unemployment levels, restructurings and mergers in the airline industry, volatile fuel costs, demand for passenger and cargo air travel, volatility in both debt and equity capital markets, liquidity of the global financial markets, the availability and cost of credit, investor and consumer confidence, global economic growth and the strength of local economies in which we operate.

Our financial condition and results of operations are dependent, in part, on the financial strength of our lessees; lessee defaults, bankruptcies and other credit problems could have a material adverse effect on our financial condition, cash flow and results of operations.

        Our financial condition and results of operations depend, in part, on the financial strength of our lessees, our ability to appropriately assess the credit risk of our lessees and the ability of our lessees to perform under our leases. Many of our lessees have expanded their airline operations through borrowings and long-term leases and may be highly leveraged. These lessees will depend on banks and the capital markets to provide working capital and to refinance existing indebtedness.

        We generate almost all of our revenue from leases to airlines and as a result we are indirectly affected by all the risks facing airlines today. The ability of our lessees to perform their obligations under our leases will depend primarily on our lessees' financial condition and cash flow, which may be affected by factors outside our control, including:

    passenger air travel demand;

    competition;

    economic conditions and currency fluctuations in the countries and regions in which the lessees operate;

    the price and availability of jet fuel;

    availability of financing and other circumstances affecting airline liquidity, including covenants in financings, collateral posting requirements contained in fuel hedging contracts and the ability of airlines to make or refinance principal payments as they come due;

    fare levels;

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    geopolitical and other events, including war, acts of terrorism, outbreaks of epidemic diseases, aircraft accidents and natural disasters;

    increases in operating costs, including labor costs, insurance costs and other general economic conditions affecting our lessees' operations;

    labor difficulties;

    governmental regulation and associated fees affecting the air transportation business; and

    environmental regulations, including, but not limited to, restrictions on noise or carbon emissions.

        To the extent that our lessees are affected by these risks, we may experience a decrease in demand for our aircraft along with reduced market lease rates, effective lease margins and aircraft values, which could require us to recognize impairments or fair value adjustments on our aircraft. Any of the foregoing could have a material adverse effect on our financial condition, cash flow and results of operations.

        Many of our existing lessees are not rated investment grade by the principal U.S. rating agencies, may suffer liquidity or funding problems and, at any point in time, may experience lease payment difficulties or be significantly in arrears in their obligations under our leases. Lessees encountering financial difficulties may seek reductions in their lease rates or other concessions, such as lowered maintenance obligations. Downturns in the aviation industry could cause or exacerbate financial and liquidity problems for our lessees and could increase the risk of delayed, missed or reduced rental payments. We may not correctly assess the credit risk of each lessee or we may charge lease rates that do not correctly reflect these risks. Our lessees may not be able to continue to meet their financial and other obligations under our leases in the future. Delayed, missed or reduced rental payments from a lessee would decrease our revenues, margins and cash flow.

        In addition, we may experience lessee defaults, lease restructurings, aircraft repossessions and airline bankruptcies and restructurings in the future. The terms and conditions of possible lease restructurings or reschedulings may result in a significant reduction or deferral of rental payments due over all or part of the remaining lease term, which may materially and adversely affect our financial condition, results of operations and growth prospects. The terms of any revised payment schedules may be unfavorable and such payments may not be made. Our default levels may increase over time if economic conditions deteriorate. If lessees of a significant number of our aircraft default on their leases, our financial condition, cash flow and results of operations could be materially and adversely affected.

We are subject to risks associated with currency fluctuations, and changes in foreign currency exchange rates could impact our results of operations.

        A significant portion of our business is conducted outside the United States and all of our lease and sale contracts to date have been denominated in U.S. dollars. Our airline customers, however, may conduct business in local currencies. An increase in the value of the U.S. dollar relative to foreign currencies could reduce demand for our aircraft and make our aircraft less competitive in international markets, which could have a material adverse effect on our financial condition, cash flow and results of operations.

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We will need additional capital to finance our aircraft purchase obligations and refinance any existing debt, and we may not be able to obtain it on acceptable terms, or at all, which may limit our ability to grow and compete in the commercial aircraft leasing market.

        Our ability to acquire additional assets and to refinance our existing debt depends to a significant degree on our ability to access the financing markets. Our access to debt and equity financing will depend on a number of factors, including our historical and expected performance, compliance with the terms of our debt agreements, general market conditions, interest rate fluctuations and the relative attractiveness of alternative investments. Some of these factors are unpredictable and beyond our control; for example, if governmental funding of export credit agencies is reduced or terminated and Export Credit Agencies ("ECA") or Export-Import Bank of the United States ("Ex-Im") facilities are no longer available, we will lose an attractive source of potential financing. We are exposed to risk from volatility and disruption in the financing markets in various ways, including difficulty or inability to finance the acquisition of aircraft, increased risk of default by our lessees, exposure to increased bank or counterparty risk and the risk that we will not be able to refinance any existing debt financings as they come due, on favorable terms or at all. In addition, volatility or disruption in the financing markets could materially and adversely affect banks and financial institutions, causing lenders to increase the costs of such financing or to be reluctant or unable to provide us with financing on terms acceptable to us.

        We compete with other lessors and airlines when acquiring aircraft, and our ability to grow our portfolio is dependent on our ability to access attractive financing. If we are unable to raise funds or obtain capital on terms acceptable to us, we may not be able to satisfy our aircraft acquisition commitments, which as of June 30, 2016, represented an aggregate of $9.2 billion through 2020. If we are unable to satisfy our purchase commitments, we may be forced to forfeit our deposits. Further, we could be exposed to potential breach of contract claims by our lessees and manufacturers. These risks may also be increased by volatility and disruption in the capital and credit markets. Therefore, if we are unable to raise funds or obtain capital on acceptable terms, our growth opportunities will be limited and our ability to refinance any existing debt could be materially and adversely affected, any of which could have a material adverse effect on our financial condition, cash flow and results of operations.

Changes in the credit environment may materially affect our future access to capital.

        Our ability to issue debt or enter into other financing arrangements on acceptable terms could be materially and adversely affected if there is a material decline in our business or if other significantly unfavorable changes in economic conditions occur. Volatility in the world financial markets could increase borrowing costs or affect our ability to gain access to the capital markets, which could have an adverse effect on our competitive position, business, financial condition, results of operations and cash flows.

The value of the aircraft and engines we own or acquire and the market rates for leases could decline, which could materially and adversely affect our financial condition, cash flow and results of operations.

        Aircraft and engine values and market rates for leases have from time to time experienced sharp decreases due to a number of factors, including, but not limited to, decreases in passenger and air cargo demand, increases in fuel costs, government regulation and increases in interest rates. Operating leases place the risk of realization of residual values on aircraft lessors because only a portion of the aircraft's and engines' value is covered by contractual cash flows under the lease. In addition to factors linked to the aviation industry generally, many other factors may affect the value of our aircraft and engines and market rates for our leases, including:

    the particular maintenance, damage, operating history and documentary records of the aircraft and engine;

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    manufacture and type or model of aircraft or engine, including the number of operators using that type of aircraft;

    whether the aircraft is subject to a lease, and if so, whether the lease terms are favorable to the lessor;

    aircraft age;

    the advent of newer models of such aircraft or aircraft types competing with such aircraft and engines;

    the regulatory authority under which the aircraft is operated and regulatory actions, including mandatory grounding of the aircraft;

    any renegotiation of an existing lease on less favorable terms;

    any tax, customs, regulatory and legal requirements that must be satisfied before the aircraft can be purchased, sold or re-leased;

    compatibility of aircraft configurations or specifications with other aircraft operated by operators of that aircraft type; and

    decreases in creditworthiness of lessees.

        Any decrease in the value of our aircraft and engines and market rates for leases, which may result from the above factors or other unanticipated factors, may diminish or delay our ability to sell aircraft at an attractive price or at all, which may prevent us from reinvesting capital from aircraft sales at the time or in the amounts desired to meet our strategic goals. As a result, any decrease in the value of our aircraft and market rates for leases could have a material adverse effect on our financial condition.

Failing to retain and/or attract skilled employees could materially and adversely affect our business.

        Our business and results of operations depend in part upon our ability to retain and attract highly skilled and qualified executive officers and management, financial, technical, sales, and support employees. Competition for qualified executive officers and employees can be challenging, and we cannot ensure success in attracting or retaining such individuals. This competition can lead to increased expenses in many areas. If we fail to attract and retain qualified executive officers and employees, it could materially adversely affect our ability to compete and it could have a material adverse effect on our ability to successfully operate our business.

Incurring significant costs resulting from lease defaults could materially and adversely affect our financial results and growth prospects.

        If we are required to repossess an aircraft after a lessee default, we may be required to incur significant costs. Those costs may include legal and other expenses of court or other governmental proceedings, including the cost of posting surety bonds or letters of credit necessary to effect repossession of an aircraft, particularly if the lessee is contesting the proceedings or is in bankruptcy. In addition, during these proceedings the relevant aircraft would likely not be generating revenue. We could also incur substantial maintenance, refurbishment or repair costs if a defaulting lessee fails to pay such costs and where such maintenance, refurbishment or repairs are necessary to put the aircraft in suitable condition for re-lease or sale. We may also incur storage costs associated with any aircraft that we repossess and are unable immediately to place with another lessee. It may also be necessary to pay off liens, airport fees, taxes and other governmental charges on the aircraft to obtain clear possession and to remarket the aircraft effectively, including, in some cases, liens that the lessee might have incurred in connection with the operation of its other aircraft, which may or may not be owned by us. We could also incur other costs in connection with the physical possession of the aircraft.

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        We may also suffer other adverse consequences as a result of a lessee default, the related termination of the lease and the repossession of the related aircraft. It is likely that our rights upon a lessee default will vary significantly depending upon the jurisdiction and the applicable law, including the need to obtain a court order for repossession of the aircraft and/or consents for deregistration or re-export of the aircraft. We anticipate that when a defaulting lessee is in bankruptcy, protective administration, insolvency or similar proceedings, additional limitations may apply. Certain jurisdictions give rights to the trustee in bankruptcy or a similar officer to assume or reject the lease or to assign it to a third party, or entitle the lessee or another third party to retain possession of the aircraft without paying lease rentals or performing all or some of the obligations under the relevant lease. In addition, certain of our lessees are owned, in whole or in part, by government-related entities, which could complicate our efforts to repossess our aircraft in that lessee's domicile. Accordingly, we may be delayed in, or prevented from, enforcing certain of our rights under a lease and in re-leasing the affected aircraft.

        If we repossess an aircraft, we may not necessarily be able to export or deregister the aircraft in a timely manner. For instance, where a lessee or other operator flies only domestic routes in the jurisdiction in which the aircraft is registered, repossession may be more difficult, especially if the jurisdiction permits the lessee or the other operator to resist deregistration. We may also incur significant costs in retrieving or recreating aircraft records required for registration of the aircraft, and in obtaining the Certificate of Airworthiness for an aircraft. If, upon a lessee default, we incur significant costs in connection with repossessing our aircraft, are delayed in repossessing our aircraft or are unable to obtain possession of our aircraft, our financial condition, cash flow and results of operations may be materially and adversely affected.

Our business model depends on the continual re-leasing of our aircraft when current leases expire and the leasing of new aircraft on order, and we may not be able to do so on favorable terms, if at all.

        Our business model depends on the continual re-leasing of our aircraft when our current leases expire to generate sufficient revenues to finance our operations and pay our debt service obligations. As of June 30, 2016, we had 14 leases expiring through the end of 2016, 27 leases expiring in 2017 and 30 leases expiring in 2018, representing $482 million, $723 million, and $654 million in net book value, respectively. The aircraft subject to those leases that we do not sell prior to lease termination will need to be sold following lease termination, re-leased, or the current leases will need to be extended.

        With respect to our operating leases, only a portion of the aircraft's value is covered by revenues generated from the lease and we may not be able to realize the aircraft's residual value over its useful life. We bear the risk of re-leasing or selling the aircraft in our fleet when our operating leases expire or when aircraft are returned to us prior to the expiration of any lease. Our ability to lease, re-lease or sell our aircraft will depend on conditions in the airline industry and general market and competitive conditions at the time the operating leases are entered into and expire. In addition, our ability to re-lease our aircraft will be affected by the particular maintenance, damage and operating history of the aircraft and its engines. Further, our ability to avoid significant off-lease time is likely to be adversely impacted by, among other things, increases in the cost of fuel, any deterioration in the financial condition of the airline industry, any major airline bankruptcies, any sale of large numbers of repossessed aircraft by financial institutions, the introduction of newer models of aircraft and other factors leading to oversupply (including manufacturer overproduction), and political and economic uncertainties.

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From time to time, the aircraft industry has experienced periods of oversupply during which lease rates and aircraft values have declined, and any future oversupply could have a material adverse effect on our financial condition, cash flow and results of operations.

        Historically, the aircraft leasing business has experienced periods of aircraft oversupply. The oversupply of a specific type of aircraft is likely to depress the lease rates for and the value of that type of aircraft. The supply and demand for aircraft is affected by various cyclical and noncyclical factors that are outside of our control, including:

    passenger and air cargo demand;

    operating costs, including fuel costs;

    general economic conditions;

    geopolitical events, including war, prolonged armed conflict and acts of terrorism;

    outbreaks of communicable diseases and natural disasters;

    governmental regulation;

    interest and foreign exchange rates;

    the availability of credit;

    airline restructurings and bankruptcies;

    manufacturer production levels and technological innovation;

    manufacturers merging or exiting the industry or ceasing to produce certain aircraft types;

    climate change initiatives, technological change, aircraft noise and emissions regulations, aircraft age limits and other factors leading to reduced demand for, early retirement or obsolescence of aircraft models;

    reintroduction into service of aircraft previously in storage; and

    airport and air traffic control infrastructure constraints.

        During recent years, the airline industry has committed to a significant number of aircraft deliveries through order placements with manufacturers. In response, aircraft manufacturers have raised their production output. The increase in these production levels could result in an oversupply of aircraft if growth in airline traffic does not meet airline industry expectations. An oversupply of new aircraft could also materially and adversely affect the rental rates for, and market values of, used aircraft.

        In addition, many airlines have eliminated certain types of aircraft from their fleets, affecting the prices both of the aircraft types they eliminate and the types they continue to use. This elimination of certain types of aircraft has resulted in an increase in the availability of such aircraft in the market, a decrease in rental rates for such aircraft and a decrease in market values of such aircraft. We cannot assure you that airlines will continue to acquire the same types of aircraft, or that we will not acquire aircraft that will cease to be used by our potential lessees. Any of these factors may produce sharp and prolonged decreases in aircraft lease rates and values, or may have a negative effect on our ability to lease or re-lease the aircraft in our fleet or in our order book. Any of these factors could have a material adverse effect on our financial condition, cash flow and results of operations.

29


Changes in interest rates may materially and adversely affect our financial condition and results of operations.

        As of June 30, 2016, substantially all of our operating leases were fixed rate, and we expect the significant majority of our indebtedness to be fixed rate. Nevertheless, changes in interest rates may materially and adversely affect our business. Higher interest rates and corresponding higher lease rates will make aircraft more expensive for airlines to lease and may result in reduced demand for new aircraft or the operating lease financing structure, which would materially and adversely affect our lease revenue. If we incur additional fixed rate debt in the future, whether to fund additional assets or refinance our existing debt, increased interest rates prevailing in the market at the time of the incurrence or refinancing of such debt will likely increase our interest expense. To the extent there is a mismatch between our debt maturities and lease expirations or we otherwise fail to benefit from a corresponding rise in revenue through higher lease rates, such an increase in interest rates could have a material adverse effect on our financial condition, cash flow and results of operations.

        Decreases in interest rates may also materially and adversely affect our lease revenues. Since our fixed rate leases are based, in part, on prevailing interest rates at the time we enter into the lease, if interest rates decrease, new fixed rate leases we enter into may be at lower lease rates and our lease revenue will be materially and adversely affected. To the extent there is a mismatch between our debt maturities and lease expirations or we otherwise fail to benefit from a corresponding decline in interest expense through lower borrowing costs, such a decrease in interest rates could have a material adverse effect on our financial condition, cash flow and results of operations.

Competition from other aircraft lessors or purchasers could have a material adverse effect on our cash flow and results of operations.

        The aircraft leasing industry is highly competitive. We encounter competition in the acquisition of aircraft from other entities such as airlines, aircraft manufacturers, financial institutions, aircraft brokers, public and private partnerships, investors and funds with more capital to invest in aircraft, and other aircraft leasing companies that we do not currently consider our major competitors.

        Competition for a leasing transaction is based principally upon lease rates, delivery dates, lease terms, reputation, management expertise, aircraft condition, specifications and configuration and the availability of the types of aircraft necessary to meet the needs of the customer. Some of our competitors may have greater financial resources and access to lower capital costs than we have and may have higher risk tolerances or different risk assessments, which could allow them to consider a wider variety of investments. In addition, some competing aircraft lessors may provide inducements to potential lessees that we cannot match. Competition in the purchase and sale of used aircraft is based principally on the availability of used aircraft, price, the terms of the lease to which an aircraft is subject and the creditworthiness of the lessee, if any. We may not always be able to compete successfully with our competitors and other entities, which could have a material adverse effect on our financial condition, cash flow and results of operations.

The number of aircraft and engine manufacturers is limited and the failure of any manufacturer to meet its obligations could have a material adverse effect on our financial condition, cash flow and results of operations.

        The supply of large commercial jet aircraft is dominated by four airframe manufacturersBoeing, Airbus, Bombardier and Embraerand four engine manufacturersCFM International, GE Aircraft Engines, Rolls Royce plc and Pratt & Whitney. As a result, we are dependent on these manufacturers' success in remaining financially stable, producing products and related components which meet the airlines' demands and fulfilling their contractual obligations to us. Should the manufacturers fail to

30


respond appropriately to changes in the market environment or fail to fulfill their contractual obligations, we may experience any of the following:

    missed or late delivery of aircraft ordered by us, which could result in an inability to meet our contractual obligations to our customers, the loss of security deposits and advance rental payments by our customers to us for new ordered aircraft, and/or the triggering of certain termination rights under lease agreements with our customers, any of which could lead to lost or delayed revenues, lower growth rates and strained customer relationships;

    an inability to acquire aircraft and engines and related components on terms which will allow us to lease those aircraft to customers at a profit, resulting in lower growth rates or a contraction in our aircraft portfolio;

    poor customer support from the manufacturers of aircraft, engines and components;

    manufacturer reputational damage, resulting in reduced demand for a particular manufacturer's product, creating downward pressure on demand for those aircraft in our fleet and reduced market lease rates and sale prices for those aircraft; and

    reduction in our competitiveness due to deep discounting by the manufacturers, which may lead to reduced market lease rates and sale prices and may affect our ability to re-lease or sell some of the aircraft in our portfolio.

Any of these circumstances could have a material adverse effect on our financial condition, cash flow and results of operations.

        There have been recent well-publicized delays by airframe manufacturers in meeting stated delivery schedules for new aircraft programs. Although we may have the right to terminate a purchase agreement in the event of protracted manufacturing delays, subject to certain grace periods, if we experience delivery delays for new aircraft types or aircraft for which we have made future commitments (such as the A320neo, A330neo and the 737 MAX), it could delay the receipt of contracted cash flows, and affected lessees could be entitled to terminate their lease arrangements with respect to such aircraft if the delays extend beyond agreed-upon periods of time. Though manufacturing delays may allow us to defer an otherwise necessary capital expenditure, which may provide us with greater financial flexibility, any resulting termination of a lease arrangement by a lessee could negatively affect our cash flow and results of operations.

        In addition, new aircraft types may not deliver their expected performance, or could experience technical problems that result in the grounding of the aircraft, which in either case could materially and adversely affect the values and lease rates of such aircraft.

Changes in fuel costs may materially and adversely affect the profitability of our leases and/or our lessees' operating results, which could in turn negatively impact our business.

        Fuel costs represent a major expense to airlines. Fuel prices can fluctuate widely depending primarily on international market conditions, geopolitical and environmental events and regulation, natural disasters, conflicts, war, regulatory changes and currency exchange rates. As a result, fuel prices are not within the control of our lessees and significant changes in fuel prices could materially and adversely affect their operating results. For instance, events such as geopolitical disruption in the Middle East, natural disasters, decisions by the Organization of the Petroleum Exporting Countries regarding its members' oil output, and changes in global demand for fuel from countries such as China can significantly affect fuel availability and prices.

        Higher fuel costs may have a material adverse impact on airline profitability, including the profitability of our lessees. Due to the competitive nature of the airline industry, airlines may not be able to pass on increases in fuel prices to their customers by increasing fares. In addition, airlines may

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not be able to manage this risk by appropriately hedging their exposure to fuel price fluctuations. For these reasons, if fuel prices increase due to adverse supply and demand conditions, terrorist attacks, acts of war, armed hostilities or natural disasters or for any other reason, our lessees may incur higher costs and generate lower net revenues, which would adversely impact their financial positions. Consequently, these conditions may (i) affect our lessees' ability to make rental and other lease payments, (ii) result in lease restructurings and aircraft repossessions, (iii) increase our costs of servicing and marketing the aircraft, (iv) impair our ability to re-lease or otherwise dispose of the aircraft on a timely basis and/or at favorable rates and (v) reduce the value receivable for the aircraft upon any disposition. These results could have a material adverse effect on our financial condition, cash flow and results of operations.

        Alternatively, lower fuel costs may reduce demand for newer fuel-efficient aircraft, which comprise a significant portion of our order book. Lease rates for aircraft with new technology that enables greater fuel efficiency are higher than rates for older, less fuel-efficient aircraft. However, a decrease in demand for newer technology due to lower fuel prices may reduce this lease rate premium, which may have a material adverse effect on the profitability of our leases of newer aircraft and could negatively impact our financial condition, cash flow and results of operations.

If our lessees fail to discharge aircraft liens, we may be obligated to pay the aircraft liens, which could have a material adverse effect on our financial condition, cash flow and results of operations.

        In the normal course of their business, our lessees are likely to incur aircraft liens that secure the payment of airport fees and taxes, customs duties, air navigation charges (including charges imposed by Eurocontrol, the European Organization for the Safety of Air Navigation), landing charges, salvage or other charges. These liens may secure substantial sums that may, in certain jurisdictions or for certain types of liens, particularly liens on entire fleets of aircraft, exceed the value of the particular aircraft to which the liens have attached. Aircraft may also be subject to mechanics' liens as a result of maintenance performed by third parties on behalf of our lessees. Although we anticipate that the financial obligations relating to these liens will be the responsibility of our lessees, if they fail to fulfill such obligations, the liens may attach to our aircraft and ultimately affect our ability to realize value from the aircraft. In some jurisdictions, aircraft liens may give the holder the right to detain or, in limited cases, sell or cause the forfeiture of the aircraft. Until they are discharged, these liens could impair our ability to repossess, re-lease or sell our aircraft. Our lessees may not comply with the anticipated obligations under their leases to discharge aircraft liens arising during the terms of the leases. If they do not, we may find it necessary to pay the claims secured by such aircraft liens to repossess the aircraft. Such payments could have a material adverse effect on our financial condition, cash flow and results of operations.

If we, or our lessees, fail to maintain our aircraft, their value may decline and we may not be able to lease or re-lease our aircraft at favorable rates, if at all, which could have a material adverse effect on our financial condition, cash flow and results of operations.

        We may be exposed to increased maintenance costs for our leased aircraft associated with a lessee's failure to properly maintain the aircraft or pay supplemental maintenance rent. If an aircraft is not properly maintained, its market value may decline, which would result in lower revenues from its lease or sale. Under our leases, our lessees are primarily responsible for maintaining the aircraft and complying with all governmental requirements applicable to the lessee and the aircraft, including operational, maintenance, government agency oversight, registration requirements and airworthiness directives. Although we require many of our lessees to pay us supplemental maintenance rent, failure of a lessee to perform required maintenance during the term of a lease could result in a decrease in value of an aircraft, an inability to re-lease an aircraft at favorable rates, if at all, or a potential grounding of an aircraft. Maintenance failures by a lessee would also likely require us to incur

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maintenance and modification costs upon the termination of the applicable lease, which could be substantial, to restore the aircraft to an acceptable condition prior to sale or re-leasing and may delay any subsequent sale or re-leasing. If we are unable to re-lease an aircraft when it comes off lease because we need to make such repairs or conduct such maintenance, we may realize a substantial loss of cash flows without any corresponding cessation in our debt service obligations. We cannot assure you that, in the event a lessee defaults under a lease, any security deposit paid or letter of credit provided by the lessee as security for the performance of its obligations under the lease will be sufficient to cover the lessee's outstanding or unpaid lease obligations and required maintenance expenses or be sufficient to discharge liens that may have attached to our aircraft. Our lessees' failure to meet their obligations to pay supplemental maintenance rent or perform required scheduled maintenance or our inability to maintain our aircraft could have a material adverse effect on our financial condition, cash flow and results of operations.

The introduction of superior aircraft technology or a new line of aircraft or engines could cause the aircraft that we own or acquire to become outdated or obsolete or oversupplied and therefore less desirable, which could have a material adverse effect on our financial condition, cash flow and results of operations.

        As manufacturers introduce technological innovations and new types of aircraft or engines, some of the aircraft in our fleet could become less desirable to potential lessees. Such technological innovations may increase the rate of obsolescence of existing aircraft faster than currently anticipated by our management, which could negatively affect the value of the aircraft in our fleet. New aircraft manufacturers could emerge to produce aircraft that compete with the aircraft we own. In addition, the imposition of increased regulation regarding stringent noise or emissions restrictions may make some of our aircraft less desirable and accordingly less valuable in the marketplace. The development of new aircraft and engine options could decrease the desirability of certain aircraft in our fleet and/or aircraft that we have ordered. This could, in turn, reduce both future residual values and lease rates for certain types of aircraft in our portfolio or that we have ordered. Any of these risks may negatively affect our ability to lease or sell our aircraft on favorable terms, if at all, which would have a material adverse effect on our financial condition, cash flow and results of operations.

Airline reorganizations could impair our lessees' ability to comply with their lease payment obligations to us or reduce aircraft values or lease rates.

        In recent years, several airlines around the world have filed for protection under their local bankruptcy and insolvency laws, some of which have gone into liquidation. Any further bankruptcies, liquidations, consolidations or reorganizations may result in aircraft becoming available for lease or purchase at reduced lease values or acquisition prices or reduce the number of potential lessees and operators of particular models of aircraft, either of which would result in inflated supply levels and consequently decreased aircraft values for any such models and lease rates in general. Historically, some airlines involved in reorganizations have undertaken substantial fare discounting to maintain cash flows and encourage continued customer loyalty. Bankruptcies and reorganizations may lead to the grounding or abandonment of significant numbers of aircraft, rejection or other termination of leases and negotiated reductions in aircraft lease rentals, with the effect of depressing aircraft market values. In addition, requests for labor concessions may result in significant labor disputes involving strikes or slowdowns or may otherwise adversely affect labor relations, thereby worsening the financial condition of the airline industry and further reducing aircraft values and lease rates.

        To the extent that a significant number of our leases are rejected by an airline customer in a reorganization and we are unable to re-lease such aircraft in a timely manner on commercially reasonable terms, our financial condition, cash flow and results of operations would be materially and adversely affected.

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Failure to obtain certain required licenses and approvals could materially and adversely affect our ability to re-lease or sell aircraft, which would have a material adverse effect on our financial condition, cash flow and results of operations.

        Lessees are subject to extensive regulation under the laws of the jurisdictions in which they are registered and in which they operate. As a result, certain aspects of our leases require licenses, consents or approvals, including consents from governmental or regulatory authorities for certain payments under our leases and for the import, export, registration or deregistration of the aircraft. Subsequent changes in applicable law or administrative practice may increase such requirements and governmental consent, once given, could be withdrawn. Furthermore, consents needed in connection with the future re-lease or sale of an aircraft may not be forthcoming. Any of these events could materially and adversely affect our ability to re-lease or sell aircraft, which would have a material adverse effect on our financial condition, cash flow and results of operations.

Our aircraft may not at all times be adequately insured either as a result of lessees failing to maintain sufficient insurance during the course of a lease or insurers not being willing to cover certain risks, which could have a material adverse effect on our financial condition.

        We do not directly control the operation of any aircraft we acquire. Nevertheless, because we hold legal title, directly or indirectly, to such aircraft, we could be sued or held strictly liable for losses resulting from the operation of such aircraft, or may be held liable for those losses on other legal theories, in certain jurisdictions around the world, or claims may be made against us as the owner of an aircraft requiring us to expend resources in our defense. We require our lessees to obtain specified levels of insurance and indemnify us for, and insure against, liabilities arising out of their use and operation of the aircraft. Some lessees may fail to maintain adequate insurance coverage during a lease term, which, although in contravention of the lease terms, would necessitate our taking some corrective action such as terminating the lease or securing insurance for the aircraft, either of which could materially and adversely affect our financial results.

        In addition, there are certain risks or liabilities that our lessees may face, for which insurers may be unwilling to provide coverage or the cost to obtain such coverage may be prohibitively expensive. For example, following the terrorist attacks of September 11, 2001, non-government aviation insurers significantly reduced the amount of insurance coverage available for claims resulting from acts of terrorism, war, dirty bombs, bio-hazardous materials, electromagnetic pulsing or similar events. Accordingly, we anticipate that our lessees' insurance or other coverage may not be sufficient to cover all claims that could or will be asserted against us arising from the operation of our aircraft by our lessees. Inadequate insurance coverage or default by lessees in fulfilling their indemnification or insurance obligations will reduce the proceeds that would be received by us in the event that we are sued and are required to make payments to claimants, which could have a material adverse effect on our financial condition, cash flow and results of operations.

Terrorist attacks, cyber-attacks or the fear of such attacks, even if not made directly on the airline industry, and unfavorable geopolitical conditions could negatively affect lessees and the airline industry, which could have a material adverse effect on our financial condition, cash flow and results of operations.

        As a result of the September 11, 2001 terrorist attacks in the United States and subsequent terrorist attacks outside the United States, airlines have increased security restrictions and face increased costs for aircraft insurance and enhanced security measures. In addition, airlines have faced and continue to face increased difficulties in acquiring war risk and other insurance at reasonable costs. Conflicts in Iraq and Afghanistan, tension over Iran's nuclear program, the ongoing civil war in Syria, and the escalation of hostilities or political crises in other locations, in each case may lead to further instability in those regions. In addition, the threat of cyber-attacks on airlines, airports, or air traffic control systems have increased security and monitoring requirements for our airline customers. Terrorist

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attacks, war or armed hostilities, cyber-attacks or the fear of such events could have a further adverse impact on the airline industry and on the financial condition of our leases, aircraft values and rental rates and may lead to restructurings of leases, airlines, or both.

        Terrorist attacks and geopolitical conditions have negatively affected the airline industry and concerns about geopolitical conditions, war or armed hostilities, terrorist attacks or cyber-attacks on airlines, airports or air traffic control systems could continue to negatively affect airlines (including our lessees) for the foreseeable future depending upon various factors, including:

    higher costs to airlines due to increased security measures;

    losses in passenger revenue due to a decrease in travel;

    the price and availability of jet fuel and the ability to obtain fuel hedges under prevailing market conditions;

    higher financing costs and difficulty in raising financing;

    significantly higher costs of aircraft insurance coverage for future claims caused by acts of war, terrorism, sabotage, hijacking and other similar perils, and the extent to which such insurance will continue to be available or may exclude events such as radioactive dirty bombs, bio-hazardous materials and electromagnetic pulsing, which may damage or destroy aircraft;

    the ability of airlines to reduce their operating costs and conserve financial resources, taking into account the increased costs incurred as a consequence of terrorist attacks, cyber-attacks and geopolitical conditions, including those referred to above; and

    special charges recognized by some airlines, such as those related to the impairment of aircraft and other long-lived assets stemming from the grounding of aircraft as a result of terrorist attacks, economic slowdown and/or airline reorganizations.

        If current industry conditions should worsen due to future terrorist attacks, cyber-attacks, acts of war or armed hostilities, our lessees may incur higher costs and generate lower revenues, which would adversely impact their financial positions. Consequently, these conditions may affect our lessees' ability to make rental and other lease payments or obtain the types and amounts of insurance required by the applicable leases (which may in turn lead to aircraft groundings), may result in additional lease restructurings and aircraft repossessions, may increase our cost of re-leasing or selling the aircraft, may impair our ability to re-lease the aircraft or lease the aircraft on a timely basis and/or at favorable rates and may reduce the value received for the aircraft upon any disposition, any of which could have a material adverse effect on our financial condition, cash flow and results of operations.

The effects of natural disasters may materially and adversely affect the airline industry in the future, which may cause our lessees to not be able to meet their lease payment obligations to us, which could have a material adverse effect on our financial condition, cash flow and results of operations.

        The lack of air travel demand and/or the inability of airlines to operate to or from certain regions due to severe weather conditions and natural disasters, including floods, earthquakes and volcano eruptions, could impact the financial health of certain airlines including our lessees. For example, the spread of volcanic ash in Europe in early 2010 and the tsunami in Japan and flooding in Thailand in 2011 caused the closure of airports and flight cancellations throughout the affected areas. The airline industry incurred substantial losses from these disruptions. Natural disasters could result in our lessees' inability to satisfy their lease payment obligations to us, which in turn could have a material adverse effect on our financial condition, cash flow and results of operations. Additionally, the potential reduction in air travel demand could result in lower demand for aircraft and consequently lower market values that would materially and adversely affect our ability to sell certain of our aircraft or re-lease other aircraft at favorable rates.

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Epidemic diseases, or the perception of their effect, could have a material adverse effect on our financial condition, cash flow and results of operations.

        The 2003 outbreak of Severe Acute Respiratory Syndrome ("SARS") was linked to air travel early in its development and had a severe impact on the aviation industry, which was evidenced by a sharp reduction in passenger bookings, cancellation of many flights and employee layoffs. Since 2003, there have been several outbreaks of avian influenza beginning in Asia and, most recently, spreading to certain parts of Africa and Europe. Although human cases of avian influenza so far have been limited in number, the World Health Organization (the "WHO") has expressed serious concern that a human influenza pandemic could develop from the avian influenza virus. More recently, in 2009, there was an outbreak of the H1N1 virus, or the swine flu, which depressed travel due to fears of a global pandemic. In 2012, Middle Eastern Respiratory Syndrome ("MERS"), a syndrome caused by the same virus that causes SARS, began to emerge in the Middle East. Scientists do not yet know for certain how MERS originated, how it spreads or whether it could erupt into a larger outbreak, as SARS did, in which case it could have a severe impact on the aviation industry. In 2014, an outbreak of the Ebola virus occurred in West Africa, leading the WHO to declare an international health emergency. In 2015, an outbreak of the Zika virus was detected in Brazil and has since spread to several other countries in Latin America, prompting the WHO to declare an international health emergency. Additional outbreaks of SARS, a more widespread outbreak of MERS or the Ebola virus, the spread of the Zika virus or the outbreak of other epidemic diseases, such as avian influenza or swine flu, or the fear of such events, could negatively affect passenger demand for air travel and the financial condition of the aviation industry, and ultimately could have a material adverse effect on our business, financial condition, cash flow and results of operations.

We are subject to various risks and requirements associated with transacting business in foreign countries.

        Our international operations expose us to trade and economic sanctions and other restrictions and regulations imposed by the United States, the European Union (the "EU") and other governments or organizations. The U.S. Departments of Justice, Commerce, State and Treasury and other federal agencies and authorities have a broad range of civil and criminal penalties they may seek to impose against corporations and individuals for violations of economic sanctions laws, export control laws, the Foreign Corrupt Practices Act ("FCPA"), and other federal statutes and regulations, including those established by the Office of Foreign Assets Control ("OFAC"). In addition, the U.K. Bribery Act of 2010 (the "Bribery Act") prohibits both domestic and international bribery, as well as bribery across both private and public sectors. An organization that "fails to prevent bribery" by anyone associated with the organization can be charged under the Bribery Act unless the organization can establish the defense of having implemented "adequate procedures" to prevent bribery. Under these laws and regulations, various government agencies may require export licenses, may seek to impose modifications to business practices, including cessation of business activities in sanctioned countries or with sanctioned persons or entities, and modifications to compliance programs, which may increase compliance costs, and may subject us to fines, penalties and other sanctions. A violation of these laws or regulations could adversely impact our business, operating results and financial condition.

        We have implemented and maintain policies and procedures designed to ensure compliance by us, our subsidiaries and our directors, officers, employees, consultants and agents with FCPA, OFAC, the Bribery Act and other export control, anti-corruption, anti-terrorism and anti-money laundering laws and regulations. We cannot assure you, however, that our directors, officers, employees, consultants and agents will not engage in conduct for which we may be held responsible, nor can we assure you that our business partners will not engage in conduct which could materially affect their ability to perform their contractual obligations to us or even result in our being held liable for such conduct. Violations of FCPA, OFAC, the Bribery Act and other export control, anti-corruption, anti-terrorism and anti-money laundering laws and regulations may result in severe criminal or civil sanctions, and we may be subject

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to other liabilities, which could have a material adverse effect on our business, financial condition, cash flows and results of operations.

        In addition, we may be subject to tax or regulatory limitations imposed by the United States or applicable foreign jurisdictions on our ability to repatriate overseas earnings, which among other things, may limit our ability to make capital expenditures or make it necessary for us to incur additional indebtedness to finance our operations.

Our limited control over our strategic relationship with Century Tokyo Leasing or any future strategic ventures may delay or prevent us from implementing our business strategy, which would have a material adverse effect on our financial condition, cash flow and results of operations.

        We have entered into a strategic relationship with Century Tokyo Leasing Corporation ("CTL") through two corporate entities, which we believe enhances our ability to lease aircraft to airlines while providing additional opportunities to expand our business globally. Under our agreements with CTL, we share control over significant decisions. Since we do not have full control over these entities, we may not be able to require them to take actions that we believe are necessary to implement our business strategy. Further, we may on occasion in the future enter into strategic ventures with third parties and be subject to similar constraints on our ability to control such ventures. Accordingly, our limited control of the entities used to operate our strategic relationship with CTL or any future strategic ventures may have a material adverse effect on our financial condition, cash flow and results of operations.

A cyber-attack that bypasses our information technology ("IT") security systems, causing an IT security breach, may lead to a material disruption of our IT systems and the loss of business information, which may hinder our ability to conduct our business effectively and may result in lost revenues and additional costs.

        Parts of our business depend on the secure operation of our computer systems to manage, process, store, and transmit information associated with aircraft leasing. A cyber-attack could adversely impact our daily operations and lead to the loss of sensitive information, including our own proprietary information and that of our customers, suppliers and employees. Such losses could harm our reputation and result in competitive disadvantages, litigation, regulatory enforcement actions, lost revenues, additional costs and liability. While we devote substantial resources to maintaining adequate levels of cyber-security, our resources and technical sophistication may not be adequate to prevent all types of cyber-attacks.

The effects of various environmental laws and regulations may negatively affect the airline industry, which may in turn have a material adverse effect on our financial condition, cash flow and results of operations.

        The airline industry is subject to various environmental laws and regulations, which are subject to change and have become more stringent. In particular, governmental regulations regarding aircraft and engine noise and emissions levels apply based on where the relevant aircraft is registered and operated. For example, numerous international jurisdictions have adopted noise regulations applicable to aircraft. The United States and the International Civil Aviation Organization (the "ICAO") have adopted standards for noise levels applicable to engines manufactured or certified on or after 2006. The EU, which imposes similar standards, has established a framework imposing operating limits on aircraft that do not comply with those standards.

        In addition, the United States and other jurisdictions have stringent limits on nitrogen oxide, carbon monoxide and carbon dioxide emissions from engines. The United States Environmental Protection Agency ("EPA") has made a proposal under the Clean Air Act for a finding that emissions from engines used primarily in commercial aircraft contribute to air pollution that causes climate change and endangers public health and welfare, and could propose regulations to limit emissions from commercial aircraft. Further, European countries generally have more strict environmental regulations

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and, in particular, the European Parliament has included aviation in the European Emissions Trading Scheme ("ETS"), which regulates greenhouse gas emissions. While carbon emissions from intra-EU flights are subject to EU ETS and international flights outside of the EU were meant to be subject to EU ETS, the EU suspended the enforcement of the ETS requirements for such extra-EU flights, instead deferring to a proposal issued by the ICAO to develop a global program to reduce international aviation emissions. In February 2016, the ICAO released its proposed emissions standard that would be applicable to new aircraft type designs beginning in 2020, new deliveries of in-production aircraft types beginning in 2023, and a cut-off date for production of aircraft that do not comply with the recommended standard. In addition, in December 2015, the 2015 United Nations Climate Change Conference adopted the Paris Agreement (the "Paris Agreement"), which set specific goals and commitments concerning global temperatures and carbon emissions. The potential impact of ETS, ICAO requirements, EPA regulations or restrictions resulting from the Paris Agreement on costs will ultimately depend on a number of factors, including baseline emissions, the price of emission credits and the number of future flights subject to ETS, ICAO requirements, EPA regulations or other restrictions. These costs have not been completely defined and may fluctuate. Any and all of the foregoing regulations or potential regulations could limit the economic life of our aircraft and engines, reduce their value, limit our ability to lease or sell the non-compliant aircraft and engines or, if engine modifications are permitted, require us to make significant additional investments in our aircraft and engines to make them compliant.

        In addition, climate change legislation has in the past been introduced in the United States, including a proposal to require transportation fuel producers and importers to purchase greenhouse gas emission credits. It is currently unknown, however, if any such proposed or future legislation will pass the United States Congress or, if passed and enacted into law, how it would specifically apply to the airline industry. Such legislation or regulation may have a materially adverse impact on the airline industry, particularly if regulators were to conclude that greenhouse gas emissions from commercial aircraft cause significant harm to the upper atmosphere or have a greater impact on climate change than other industries. Potential actions may include the imposition of requirements to purchase emission offsets or credits, which could require participation in emission trading (such as is required in the EU), substantial taxes on emissions and growth restrictions on airline operations, among other potential regulatory actions.

        Compliance with current or future legislation, regulations, taxes or duties imposed to deal with environmental concerns could cause the lessees to incur higher costs and lead to higher ticket prices, which could mean lower demand for travel, thereby generating lower net revenues and resulting in an adverse impact on the financial condition of our lessees. Consequently, such compliance may affect our lessees' ability to make rental and other lease payments and reduce the value received for the aircraft upon any disposition, which could have a material adverse effect on our financial condition, cash flow and results of operations.

If we acquire a high concentration of a particular model of aircraft or engine type, our business and financial results could be materially and adversely affected by changes in market demand or problems specific to that aircraft model.

        If we acquire a high concentration of a particular model of aircraft, our business and financial results could be materially and adversely affected if the market demand for that model of aircraft declines, if it is redesigned or replaced by its manufacturer or if this type of aircraft experiences design or technical problems. If we acquire a high concentration of a particular aircraft model and such model encounters technical or other problems, the value and lease rates of such aircraft will likely decline, and we may be unable to lease such aircraft on favorable terms, if at all. A significant technical problem with a specific type of aircraft or engine could result in the grounding of the aircraft. Any decrease in the value and lease rates of our aircraft may have a material adverse effect on our financial condition, cash flow and results of operations.

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Aircraft have limited economically useful lives and depreciate over time, which could materially and adversely affect our financial condition, cash flow and results of operations.

        As commercial aircraft age, they will depreciate and typically will generate lower revenues and cash flows. We must be able to replace such older depreciated aircraft with newer aircraft, or our ability to maintain or increase our revenues and cash flow will decline. In addition, since we depreciate our aircraft for accounting purposes on a straight-line basis to the aircraft's residual value over our estimated useful life, if we dispose of an aircraft for a price that is less than the depreciated book value of the aircraft on our balance sheet, we will recognize a loss on the sale.

Failure to satisfy our aircraft acquisition commitments could have a material adverse effect on our financial condition, cash flow and results of operations.

        As of June 30, 2016, we have entered into purchase commitments to acquire a total of 132 new aircraft for delivery through 2020. If we are unable to maintain our financing sources or find new sources of financing or if the various conditions to our existing commitments are not satisfied, we may be unable to close the purchase of some or all of the aircraft which we have commitments to acquire. If our aircraft acquisition commitments are not closed for these or other reasons, we will be subject to several risks, including the following:

    forfeiting deposits and pre-delivery payments and having to pay and expense certain significant costs relating to these commitments, such as actual damages, and legal, accounting and financial advisory expenses, and not realizing any of the benefits of completing the transactions;

    defaulting on our lease commitments, which could result in monetary damages and damage to our reputation and relationships with lessees; and

    failing to capitalize on other aircraft acquisition opportunities that were not pursued due to our management's focus on these commitments.

These risks could have a material adverse effect on our financial condition, cash flow and results of operations.

We may be indirectly subject to global economic and political risks, including those associated with emerging markets and the British referendum to exit the European Union, which could have a material adverse effect on our financial condition, cash flow and results of operations.

        Part of our business strategy involves leasing aircraft to lessees outside of the United States, including to airlines in emerging market countries. Emerging market countries have less-developed economies and infrastructure and are often more vulnerable to economic and geopolitical challenges and may experience significant fluctuations in gross domestic product, interest rates and currency exchange rates, as well as civil disturbances, government instability, nationalization and expropriation of private assets and the imposition of taxes or other charges by government authorities. The occurrence of any of these events in markets served by our lessees and the resulting economic instability that may arise, particularly if combined with high fuel prices, could materially and adversely affect the value of our aircraft subject to lease in such countries, or the ability of our lessees, which operate in these markets, to meet their lease obligations. As a result, lessees that operate in emerging market countries may be more likely to default than lessees that operate in developed countries. In addition, legal systems in emerging market countries may be less developed, which could make it more difficult for us to enforce our legal rights in such countries.

        In addition, we lease aircraft to lessees based in or operating in the United Kingdom and/or the European Union. Economic uncertainty or deteriorating economic conditions as a result of the British referendum to exit the European Union or other causes may lead airlines to reduce capital investment

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or planned fleet expansion, which could negatively impact our ability to lease new aircraft or release existing aircraft.

        Further, demand for aircraft is dependent on passenger traffic, which in turn is dependent on general business and economic conditions. As a result, weak or negative global economic growth or economic growth in a particular region, including the United Kingdom and the European Union, may have an indirect effect on the value of the assets that we acquire if airlines and other potential lessees are materially and adversely affected. We cannot assure you that any assets we purchase will not decline in value, which may have a material adverse effect on our results of operations or our financial condition. The potential effect of these risks will be particularly pronounced if we have a high concentration of lessees in the region or regions with adverse conditions at a particular point in time. For these and other reasons, our financial results and growth prospects may be negatively impacted by adverse economic and political developments in other countries, including in emerging markets, the United Kingdom and the European Union.

The terms of our indebtedness or any indebtedness we incur in connection with the separation or in the future may restrict our operations, particularly our ability to respond to changes or to take certain actions.

        The instruments governing any indebtedness we incur will contain a number of restrictive covenants that will impose significant operating and financial restrictions on us and may limit our ability to engage in acts that may be in our long-term best interest, including restrictions on our ability to:

    incur or guarantee additional indebtedness and issue disqualified stock or preferred stock;

    pay dividends on or repurchase certain equity interests or prepay subordinated indebtedness;

    enter into transactions with affiliates;

    sell, transfer or otherwise dispose of certain assets, including as a result of having pledged assets to secure indebtedness;

    alter our lines of business; or

    consolidate, merge, sell or otherwise dispose of substantially all of our assets.

        A breach of any such covenants or restrictions could result in an event of default under one or more instruments governing any indebtedness we incur. Such default may allow the creditors to accelerate such indebtedness, may result in the acceleration of any other debt to which a cross-acceleration or cross-default provision applies, and may permit foreclosure on any collateral granted as security under our debt arrangements. As a result of these restrictions, we may be:

    limited in how we conduct our business;

    unable to raise additional debt or equity financing to operate during general economic or business downturns; or

    unable to compete effectively or take advantage of new business opportunities.

        These restrictions may affect our ability to grow in accordance with our strategy. In addition, our financial results, any indebtedness we incur and our credit ratings could materially and adversely affect the availability and terms of our financing.

Our expected level of indebtedness and our existing and future purchase commitments will require significant debt service and pre-delivery payments.

        Upon the completion of the separation, we expect to have approximately $[    ·    ] of outstanding indebtedness. In addition, certain of our debt facilities require us to pay commitment fees. Due to the capital intensive nature of our business and the expected future growth of our aircraft portfolio, we

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expect that we will incur additional indebtedness in the future. If conditions deteriorate in aircraft- and aviation-related markets, our operations may not generate sufficient cash to service our debt, which will have a material adverse impact on us. Specifically, our expected level of indebtedness may:

    cause a substantial portion of our cash flows from operations to be dedicated to interest and principal payments and therefore not be available to fund our operations, working capital, capital expenditures, expansion, acquisitions or general corporate or other purposes;

    restrict the ability of some of our subsidiaries to make distributions to us;

    place us at a disadvantage compared to competitors that have less debt;

    impair our ability to obtain additional financing in the future;

    limit our flexibility in planning for, or reacting to, changes in our business and industry; and

    make us more vulnerable to downturns in our business, our industry or the economy in general.

        In addition, as of June 30, 2016, we have 132 aircraft on order for an aggregate commitment amount of approximately $9.2 billion. The majority of these aircraft purchase commitments require, and any future aircraft purchase commitments may require, significant pre-delivery payments to secure our purchases in advance of delivery. These payments may increase our future capital spending needs and/or may require us to increase our level of debt in the future. Our inability to fund these pre-delivery payments from our cash flow from operations or to raise capital needed to finance these pre-delivery requirements could impair our ability to enter into new purchase commitments or to satisfy our obligations under existing commitments. In addition, to the extent that cash flows from operations are dedicated to pre-delivery payments, that portion of cash flows would be unavailable to fund our operations, working capital, capital expenditures, expansion, acquisitions, or general corporate or other purposes.

        Any of these circumstances could have a material adverse effect on our financial condition, cash flow and results of operations.

Risks Related to the Separation

We have no history of operating as an independent company, and our historical and pro forma financial information is not necessarily representative of the results that we would have achieved as a separate, publicly traded company and may not be a reliable indicator of our future results.

        We have not operated as, and our management team has not managed, a stand-alone company. The historical information about us in this information statement refers to our business as operated by and integrated with CIT. Our historical and pro forma financial information included in this information statement is derived from the consolidated financial statements and accounting records of CIT. Accordingly, the historical and pro forma financial information included in this information statement does not necessarily reflect the financial condition, results of operations or cash flows that we would have achieved as a separate, publicly traded company during the periods presented or those that we will achieve in the future primarily as a result of the factors described below:

    Prior to the separation, our business has been operated by CIT as part of its broader corporate organization, rather than as an independent company. CIT or one of its affiliates performed various corporate functions for us, such as legal, treasury, accounting, tax, auditing, human resources, public affairs and finance. Our historical and pro forma financial results reflect allocations of corporate expenses from CIT for such functions and may not be representative of the expenses we would have incurred had we operated as a separate publicly traded company.

    Currently, our business is integrated with the other businesses of CIT. Historically, we have shared economies of scope and scale in costs, employees, vendor relationships and certain

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      corporate functions such as human resources and finance. Although we will enter into a transition services agreement with CIT, these arrangements will continue for a limited period of time, may not retain or fully capture the benefits that we have enjoyed as a result of being integrated with CIT and may result in us paying higher charges than in the past for these services. This could have a material adverse effect on our financial condition, cash flow and results of operations following the completion of the separation.

    Generally, our working capital requirements and capital for our general corporate purposes, including acquisitions and capital expenditures, have historically been satisfied as part of the corporate-wide cash management policies of CIT. Following the completion of the separation, we may need to obtain additional financing from banks, through public offerings or private placements of debt or equity securities, strategic relationships or other arrangements, which may or may not be available and may be more costly.

    After the completion of the separation, the cost of capital for our business may be higher than CIT's cost of capital prior to the separation.

        Other significant changes may occur in our cost structure, management, financing and business operations as a result of operating as a company separate from CIT. For additional information about the past financial performance of our business and the basis of presentation of the historical combined financial statements and the unaudited pro forma combined financial statements of our business, see the sections entitled "Unaudited Pro Forma Combined Financial Statements," "Selected Historical Combined Financial Data," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the historical financial statements and accompanying notes included elsewhere in this information statement.

There could be significant liability if the distribution is determined to be a taxable transaction.

        It is a condition to the distribution that CIT receives an opinion from outside tax counsel to the effect that the requirements for tax-free treatment under Section 355 of the Code should be satisfied. The opinion relies on certain facts, assumptions, representations and undertakings from CIT and us regarding the past and future conduct of the companies' respective businesses and other matters. If any of these facts, assumptions, representations or undertakings is incorrect or not satisfied, CIT and its stockholders may not be able to rely on the opinion of tax counsel and could be subject to significant tax liabilities.

        Notwithstanding the opinion of tax counsel, the Internal Revenue Service (the "IRS") could determine on audit that the separation is taxable if it determines that any of these facts, assumptions, representations or undertakings are incorrect or have been violated or if it disagrees with the conclusions in the opinion, or for other reasons, including as a result of certain significant changes in the share ownership of CIT or us after the separation. If the separation is determined to be taxable for U.S. federal income tax purposes, CIT and its stockholders that are subject to U.S. federal income tax could incur significant U.S. federal income tax liabilities and we could incur significant liabilities. For a description of the sharing of such liabilities between CIT and us, see the section entitled "Relationship with CIT Following the Separation and Distribution—Tax Matters Agreement."

We may be unable to engage in certain corporate transactions after the separation because such transactions could jeopardize the intended tax-free status of the distribution.

        To preserve the tax-free treatment to CIT of the separation and the distribution, under the tax matters agreement that C2 will enter into with CIT, we will be restricted from taking any action that prevents the distribution and related transactions from being tax-free for U.S. federal income tax

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purposes. Under the tax matters agreement, for the two-year period following the distribution, we will be prohibited, except in certain circumstances, from:

    entering into any transaction resulting in the acquisition of all or a portion of our stock or substantially all of our assets, whether by merger or otherwise with certain parties;

    merging, consolidating or liquidating;

    issuing equity securities beyond certain thresholds;

    repurchasing our capital stock beyond certain thresholds; or

    ceasing to actively conduct its business.

        These restrictions may limit our ability to pursue certain strategic transactions or other transactions that might increase the value of our business. In addition, under the tax matters agreement, we are required to indemnify CIT against any such tax liabilities as a result of the acquisition of our stock or assets, even if we did not participate in or otherwise facilitate the acquisition.

Until the separation and distribution occur, CIT has sole discretion to change the terms of the separation and distribution in ways that may be unfavorable to us.

        Until the separation and distribution occur, we will be a wholly owned subsidiary of CIT. Accordingly, CIT will effectively have the sole and absolute discretion to determine and change the terms of the separation and distribution, including the establishment of the record date for the distribution and the distribution date. These changes could be unfavorable to us. In addition, CIT may decide at any time not to proceed with the separation and distribution, including if certain third-party approvals or consents are not received or are received subject to conditions. Such third-party approvals include the approval by the Board of Governors of the Federal Reserve System. Receipt of any required approvals from these institutions is a condition to the separation and distribution.

Potential indemnification liabilities to CIT pursuant to the separation and distribution agreement could have a material adverse effect on us.

        The separation and distribution agreement with CIT provides for, among other things, the principal corporate transactions required to effect the separation, certain conditions to the separation and distribution and provisions governing our relationship with CIT with respect to and following the separation and distribution. Among other things, the separation and distribution agreement provides for indemnification obligations designed to make us financially responsible for substantially all liabilities that may exist relating to our business activities, whether incurred prior to or after the separation and distribution, as well as those obligations of CIT that we will assume pursuant to the separation and distribution agreement. If we are required to indemnify CIT under the circumstances set forth in this agreement, we may be subject to substantial liabilities. For a description of this agreement, please refer to the section entitled "Relationship with CIT Following the Separation and Distribution—Separation Agreement."

We may not achieve some or all of the expected benefits of the separation, the separation may materially and adversely affect our business, and we may not be able to execute on our business plan and strategy following the separation.

        We may be unable to achieve the full strategic and financial benefits expected to result from the separation, or such benefits may be delayed or not occur at all. The separation and distribution is expected to provide the following benefits, among others:

    enhanced transparency and a distinct investment identity for C2;

    enhanced strategic and management focus;

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    creation of a more efficient holder of aircraft assets;

    access to capital markets to support growth; and

    alignment of incentives with performance objectives.

        We may not achieve these and other anticipated benefits for a variety of reasons, including, among others: (a) the separation will require significant amounts of management's time and effort, which may divert management's attention from operating and growing our business; (b) following the separation, we may be more susceptible to market fluctuations and other adverse events than if it were still a part of CIT; (c) following the separation, our business will be less diversified than CIT's business prior to the separation; and (d) the other actions required to separate our business from that of CIT could disrupt our operations.

        In addition, we may be unable to successfully execute on our business plan and strategies. Although our management team has substantial experience in the industry and with our business, we have not operated as an independent company and may be unable to execute on our business plan and strategies for this and other reasons, including our ability to secure financing.

        If we fail to achieve some or all of the benefits expected to result from the separation, or if such benefits are delayed, or if we are unable to successfully execute on our business plan and strategies, our business, financial conditions and results of operations could be materially and adversely affected.

No vote of the CIT stockholders is required in connection with the separation and distribution.

        No vote of the CIT stockholders is required in connection with the separation and distribution. Accordingly, if this transaction occurs and you do not want to receive our common stock in the distribution, your only recourse will be to divest yourself of your CIT common stock prior to the record date for the distribution.

CIT may fail to perform under various transaction agreements that will be executed as part of the separation or we may fail to have necessary systems and services in place when certain of the transaction agreements expire.

        In connection with the separation, C2 and CIT will enter into a separation agreement and will also enter into various other agreements, including a transition services agreement, a tax matters agreement and an employee matters agreement. The separation agreement, the tax matters agreement and the employee matters agreement will determine the allocation of assets and liabilities between the companies following the separation for those respective areas and will include any necessary indemnifications related to liabilities and obligations. The transition services agreement will provide for the performance of certain services by CIT for the benefit of C2 for a limited period of time not to exceed [    ·    ] months after the separation. In addition, we will enter into lease and sublease agreements with CIT for facilities in Livingston, New Jersey and New York, New York, respectively.

        We will rely on CIT to satisfy its performance and payment obligations under these agreements. If CIT is unable to satisfy its obligations under these agreements, including its indemnification obligations, we could incur operational difficulties or losses. If we do not have in place our own systems and services, or if we do not have agreements with other providers of these services once certain of these transaction agreements expire or terminate, we may not be able to operate our business effectively and our profitability may decline.

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We may have been able to receive more favorable terms from unaffiliated third parties than the terms we will receive in our agreements with CIT.

        We will enter into agreements with CIT in connection with the separation, including a separation and distribution agreement, a transition services agreement, a tax matters agreement and an employee matters agreement. Such agreements were prepared in the context of the separation while we were still a wholly owned subsidiary of CIT. Accordingly, during the period in which the terms of these agreements were prepared, we did not have an independent board of directors or management team that was independent of CIT. As a result, although the parties attempted to include arm's-length terms in these agreements, the terms of these agreements may not reflect terms that would have resulted from arm's-length negotiations between unaffiliated third parties. Arm's-length negotiations between CIT and an unaffiliated third party in another form of transaction, such as a buyer in a sale of a business transaction, may have resulted in more favorable terms to the unaffiliated third party. See the section entitled "Relationship with CIT Following the Separation and Distribution."

After the distribution, certain members of management, directors and stockholders will hold stock in both CIT and C2, and as a result may face actual or potential conflicts of interest.

        After the distribution, the management and directors of each of CIT and C2 may own both CIT common stock and C2 common stock. This ownership overlap could create, or appear to create, potential conflicts of interest when our management and directors and CIT's management and directors face decisions that could have different implications for us and CIT. For example, potential conflicts of interest could arise in connection with the resolution of any dispute between us and CIT regarding the terms of the agreements governing the distribution and our relationship with CIT thereafter. These agreements include the separation and distribution agreement, the tax matters agreement, the employee matters agreement, the transition services agreement and any commercial agreements between the parties or their affiliates. Potential conflicts of interest may also arise out of any commercial arrangements that we or CIT may enter into in the future.

Fulfilling our obligations incidental to being a public company, including with respect to certain tax filing obligations and the requirements of and related rules under the Sarbanes-Oxley Act of 2002, will place significant demands on our management, administrative and operational resources, including accounting and information technology resources.

        Our financial results previously were included within the consolidated results of CIT, and its reporting and control systems were appropriate for subsidiaries of a public company. Prior to the distribution, we were not directly subject to reporting and other requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and Section 404 of the Sarbanes-Oxley Act of 2002. After the distribution, we expect to be subject to such reporting and other requirements, which require, among other things, annual management assessments of the effectiveness of our internal controls over financial reporting and a report by our independent registered public accounting firm addressing these assessments. These and other obligations, including certain tax filing obligations, will place significant demands on our management, administrative, and operational resources, including accounting and information technology resources. To comply with these requirements, we anticipate that we will need to upgrade our systems, including duplicating computer hardware infrastructure, implement additional financial and management controls, reporting systems and procedures, and hire additional accounting, finance and information technology staff. If we are unable to do this in a timely and effective fashion, our ability to comply with our financial reporting requirements and other rules that apply to reporting companies could be impaired and our business could be harmed.

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We may be unable to maintain adequate internal controls of our financial reporting.

        Section 404 of the Sarbanes-Oxley Act of 2002 will require us to document and test the effectiveness of our internal controls over financial reporting in accordance with an established internal control framework and to report management's conclusion as to the effectiveness of our internal controls over financial reporting. In addition, our independent registered public accounting firm will audit our assessment and the operating effectiveness of our internal control over financial reporting. If management or our independent registered public accounting firm were to conclude that our internal control over financial reporting was not effective, investors could lose confidence in our reported financial information and the value of our common stock could be adversely affected. Our failure to maintain effective internal controls could have a material adverse effect on our business in the future and on our access to the capital markets.

Risks Related to Our Common Stock

No market currently exists for our common stock and we cannot be certain that an active trading market for our common stock will develop or be sustained after the distribution, and, following the distribution, our stock price may fluctuate significantly.

        A public market for our common stock does not currently exist. We anticipate that on or about the record date for the distribution, trading of shares of our common stock will begin on a "when-issued" basis, which will continue through the distribution date. However, we cannot guarantee that an active trading market will develop or be sustained for our common stock after the distribution. Nor can we predict the prices at which shares of our common stock may trade after the distribution. Similarly, we cannot predict the effect of the distribution on the trading prices of our common stock or whether the combined market value of the shares of our common stock and CIT common stock will be less than, equal to or greater than the market value of CIT common stock prior to the distribution.

        The market price of our common stock may decline or fluctuate significantly due to a number of factors, some of which may be beyond our control, including:

    actual or anticipated fluctuations in our operating results;

    declining operating revenues derived from our core business;

    the gain or loss of significant customers;

    the operating and stock price performance of comparable companies;

    changes in our stockholder base due to the separation;

    changes in the regulatory and legal environment under which we operate; and

    market conditions in the airline industry, the finance industry, and the domestic and worldwide economy as a whole.

There may be substantial changes in our stockholder base.

        Many investors holding CIT common stock may hold that stock because of a decision to invest in a company with CIT's profile. Following the distribution, the shares of our common stock held by those investors will represent an investment in a commercial aircraft leasing company with a different profile. This may not be aligned with a holder's investment strategy and may cause the holder to sell the shares. As a result, our stock price may decline or experience volatility as our stockholder base changes.

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We cannot guarantee the timing, amount or payment of dividends on our common stock, if any, now or in the future.

        We do not plan to initially pay regular cash dividends following the distribution. The timing, declaration, amount and payment of future dividends to our stockholders will fall within the discretion of our board of directors. The board's decisions regarding the payment of dividends will depend on many factors, such as our financial condition, earnings, capital requirements, any future debt service obligations, covenants associated with any of our future debt service obligations, industry practice, legal requirements, regulatory constraints and other factors that the board deems relevant. Our ability to pay dividends will depend on our ongoing ability to generate cash from operations and on its access to the capital markets. For more information, see the section entitled "Dividend Policy."

Your ownership percentage in the company may be diluted in the future.

        In the future, your percentage ownership in us may be diluted because of equity awards that we will be granting to our directors, officers and employees or otherwise as a result of equity issuances for acquisitions or capital market transactions. After the distribution, as a result of conversion of their CIT restricted stock units to C2 stock units, certain of our employees will have restricted stock units that will be converted into shares of C2 common stock upon vesting. We anticipate that our executive compensation committee will grant additional stock-based awards to certain of our employees after the distribution. Such awards will have a dilutive effect on our earnings per share, which could materially and adversely affect the market price of our common stock. From time to time, we will issue additional stock-based awards to certain of our employees under our employee benefits plans.

        In addition, our amended and restated certificate of incorporation will authorize us to issue, without the approval of our stockholders, one or more classes or series of preferred stock that have such designation, powers, preferences and relative, participating, optional and other special rights, including preferences over our common stock respecting dividends and distributions, as our board of directors generally may determine. The terms of one or more classes or series of preferred stock could dilute the voting power or reduce the value of our common stock. Similarly, the repurchase or redemption rights or liquidation preferences we could assign to holders of preferred stock could affect the residual value of our common stock. See the section entitled "Description of C2's Capital Stock."

Certain provisions in our amended and restated certificate of incorporation and bylaws, and of Delaware law, may prevent or delay an acquisition of the company, which could decrease the trading price of our common stock.

        Our amended and restated certificate of incorporation and amended and restated bylaws will contain, and Delaware law contains, provisions that are intended to deter coercive takeover practices and inadequate takeover bids by making such practices or bids unacceptably expensive to the bidder and to encourage prospective acquirers to negotiate with our board of directors rather than to attempt a hostile takeover. These provisions include, among others:

    the division of our board of directors into three classes of directors, with each class initially to be elected to serve a staggered three-year term, until the annual meeting of stockholders in 2020 at which time the entire board will be elected to one-year terms;

    until the time our board is no longer divided into classes, the inability of shareholders to remove directors without cause;

    restrictions on an "interested stockholder" engaging in certain business combinations with us for a three-year period following the date the interested stockholder became such;

    the inability of stockholders to call a special meeting of the stockholders in the absence of a request made by at least 25% of the voting power of our issued and outstanding common stock;

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    the inability of stockholders to act by written consent;

    the right of our board of directors to issue preferred shares without stockholder approval; and

    supermajority vote requirements for stockholders to amend certain provisions of our amended and restated certificate of incorporation relating to, among others, the number, term and election of C2's directors, the filling of board vacancies, the calling of special meetings of stockholders, and director and officer indemnification.

        We believe that these provisions will protect our stockholders from coercive or otherwise unfair takeover tactics by requiring potential acquirers to negotiate with our board of directors and by providing our board of directors with more time to assess any acquisition proposal. These provisions are not intended to make us immune from takeovers. However, these provisions will apply even if the offer may be considered beneficial by some stockholders and could delay or prevent an acquisition that our board of directors determines is not in the best interests of the company and our stockholders. These provisions may also prevent or discourage attempts to remove and replace incumbent directors.

        In addition, an acquisition or further issuance of our stock could trigger the application of Section 355(e) of the Code. For a discussion of Section 355(e), see the section entitled "Material U.S. Federal Income Tax Consequences." Under the tax matters agreement, we would be required to indemnify CIT for the resulting tax, and this indemnity obligation might discourage, delay or prevent a change of control that you may consider favorable.

Our amended and restated certificate of incorporation will designate the state courts of the State of Delaware, or, if no state court located in the State of Delaware has jurisdiction, the federal court for the District of Delaware, as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by our stockholders, which could discourage lawsuits against the company and our directors and officers.

        Our amended and restated certificate of incorporation will provide that unless the board of directors otherwise determines, the state courts of the State of Delaware, or, if no state court located in the State of Delaware has jurisdiction, the federal court for the District of Delaware will be the sole and exclusive forum for any derivative action or proceeding brought on behalf of the company, any action asserting a claim of breach of a fiduciary duty owed by any director or officer of the company to the company or our stockholders, creditors or other constituents, any action asserting a claim against the company or any director or officer of the company arising pursuant to any provision of the Delaware General Corporation Law (the "DGCL"), or our amended and restated certificate of incorporation or bylaws, or any action asserting a claim against the company or any director or officer of the company governed by the internal affairs doctrine. This exclusive forum provision may limit the ability of our stockholders to bring a claim in a judicial forum that such stockholders find favorable for disputes with the company or our directors or officers, which may discourage such lawsuits against the company and our directors and officers. Alternatively, if a court outside of Delaware were to find this exclusive forum provision inapplicable to, or unenforceable in respect of, one or more of the specified types of actions or proceedings described above, we may incur additional costs associated with resolving such matters in other jurisdictions, which could materially and adversely affect our business, financial condition or results of operations.

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CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS

        This information statement and other materials CIT and the company have filed or will file with the SEC contain, or will contain, certain forward-looking statements regarding business strategies, market potential, future financial performance and other matters. The words "believe," "expect," "estimate," "could," "would," "should," "intend," "may," "plan," "seek," "anticipate," "project" and similar expressions, among others, generally identify "forward-looking statements," which speak only as of the date the statements were made. The matters discussed in these forward-looking statements are subject to risks, uncertainties and other factors that could cause actual results to differ materially from those projected, anticipated or implied in the forward-looking statements. In particular, information included under "Risk Factors," "Management's Discussion and Analysis of Financial Condition and Results of Operations," "Industry," "Business," "The Separation and Distribution" and other sections of this information statement contain forward-looking statements. Where, in any forward-looking statement, an expectation or belief as to future results or events is expressed, such expectation or belief is based on the current plans and expectations of our management and expressed in good faith and believed to have a reasonable basis, but there can be no assurance that the expectation or belief will result or be achieved or accomplished. Whether or not any such forward-looking statements are in fact achieved will depend on future events, some of which are beyond our control. Except as may be required by law, we undertake no obligation to modify or revise any forward-looking statements to reflect new information, events or circumstances occurring after the date of this information statement. Factors, risks, trends and uncertainties that could cause actual results or events to differ materially from those anticipated include the matters described under "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations," in addition to the following other factors, risks, trends and uncertainties:

    the economic condition of the global airline industry;

    the financial condition and liquidity of our lessees;

    competitive pressures within the industry;

    periods of aircraft oversupply during which lease rates and aircraft values decline;

    potential natural disasters, epidemic diseases, civil unrest, political events, terrorism, cyber security attacks or similar events and the amount of our and our lessees insurance coverage, if any, relating thereto;

    changes in interest rates;

    the limited number of engine and aircraft manufacturers;

    our ability to make acquisitions of, or to lease or re-lease, aircraft on favorable or expected terms;

    our ability to obtain additional capital at the times and in the amounts needed to finance growth and operations on attractive or acceptable terms;

    our ability to successfully negotiate aircraft purchases, sales and leases, and collect outstanding amounts due and to repossess aircraft and renegotiate leases under defaulted leases;

    our ability to attract and retain employees;

    changes in fuel prices;

    regulatory changes affecting commercial aircraft operators, aircraft maintenance, engine standards or taxes;

    adverse outcomes in proceedings with governmental authorities or administrative agencies;

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    our inability to engage in certain corporate transactions following the separation;

    any failure to realize expected benefits from the separation; and

    other uncertainties relating to general economic, political, business, industry, regulatory and market conditions.

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THE SEPARATION AND DISTRIBUTION

Overview

        On October 23, 2015, CIT announced that it would explore strategic alternatives for its commercial aircraft leasing business. On December 9, 2015, CIT management stated that CIT would pursue a dual-track process that would include exploring both a sale of the business and a tax-free spin-off to effect the separation, and reaffirmed its commitment to this process in a March 23, 2016 presentation to investors.

        On [    ·    ], the CIT board of directors determined to effect the separation by means of a pro rata distribution to CIT stockholders of all of the outstanding shares of common stock of C2, a new entity formed to hold the assets and liabilities associated with the commercial aircraft leasing business. The board approved the distribution of all of the issued and outstanding shares of C2 common stock on the basis of one share of C2 common stock for every [    ·    ] shares of CIT common stock held at the close of business on the record date of [    ·    ], subject to the satisfaction or waiver of the conditions to the distribution as described in this information statement.

        Subject to the satisfaction of the conditions to the distribution as described in this information statement, at 12:01 a.m., Eastern Time, on [    ·    ], the distribution date, each CIT stockholder will receive one share of C2 common stock for every [    ·    ] shares of CIT common stock held at the close of business on the record date for the distribution, as described below. CIT stockholders will receive cash in lieu of any fractional shares of C2 common stock that they would have received after application of this ratio. CIT's stockholders will not be required to make any payment, surrender or exchange their shares of CIT common stock or take any other action to receive their shares of C2 common stock in the distribution. The distribution of C2 common stock as described in this information statement is subject to the satisfaction or waiver of certain conditions. For a more detailed description of these conditions, see "Conditions to the Distribution."

Reasons for the Separation

        The CIT Board of Directors believes that separating the commercial aircraft leasing business from the remaining businesses of CIT is in the best interests of CIT and its stockholders for a number of reasons, including:

    Enhanced transparency and a distinct investment identity for each of CIT and C2.  The separation will allow investors to separately value CIT and C2 based on their distinct investment identities, enhancing investor transparency and better highlighting the attributes of both companies. C2's commercial aircraft leasing business differs from CIT's commercial banking, consumer and community banking, and other transportation finance businesses in several respects, such as the duration and structure of assets, sources of financing, credit characteristics of customers, concentration of portfolio and geographic footprint. In addition, investors and analysts often apply different valuation methodologies to the two businesses. The separation will enable investors to evaluate the merits, strategy, performance, and future prospects of each company's respective business relative to its peers and to invest in each company separately based on these distinct characteristics. The separation may attract new investors whose investment strategies call for a more concentrated exposure to either the commercial aircraft leasing business or CIT's other businesses.

    Enhanced strategic and management focus.  The separation will allow C2 and CIT to more effectively pursue their distinct operating priorities and strategies and enable management of both companies to focus on their respective opportunities for long-term growth and profitability. C2's management will be able to focus on its commercial aircraft leasing business, while the

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      management of CIT will be dedicated to growing its commercial banking, consumer and community banking, and other transportation finance businesses.

    Creation of a more efficient holder of aircraft assets.  CIT is a financial holding company with a national bank subsidiary, and therefore it and its subsidiaries are subject to regulation from several governmental authorities, including the Office of the Comptroller of the Currency, the Board of Governors of the Federal Reserve System and the Federal Reserve Bank of New York. As a result, CIT is subject to certain limitations on its activities, transactions with affiliates and payment of dividends, and certain standards for capital and liquidity, safety and soundness and incentive compensation. In particular, because C2's aircraft order book is recognized as an off-balance sheet commitment and CIT, as a financial holding company, must hold capital against these future deliveries, depending on the size of the order book, CIT's return on equity and financial performance could potentially be reduced relative to aircraft leasing peers. Following the separation, C2, which will not be a bank holding company or financial holding company, will no longer be subject to many of these capital and regulatory requirements, enabling it to establish a capital structure tailored to the needs of the commercial aircraft leasing business and to deploy capital more effectively, and CIT will significantly reduce its non-earning off-balance sheet commitments.

    Access to capital markets to support growth.  The separation will create an independent capital structure that will afford C2 direct access to both equity and debt markets and will facilitate C2's ability to effect future acquisitions of aircraft assets. As a result, C2 will generally have more flexibility to capitalize on its growth opportunities.

    Alignment of incentives with performance objectives.  The separation will facilitate incentive compensation arrangements for employees more directly tied to the performance of the relevant company's business, and enhance employee hiring and retention by, among other things, improving the alignment of management and employee incentives with performance and growth objectives.

    Preservation of CIT's NOLs.  Unlike other separation alternatives, including a sale, a spin-off of CIT's commercial aircraft business is expected to allow CIT to preserve its NOLs, which are available to offset future CIT taxable income and gains.

The CIT Board of Directors also considered a number of potentially negative factors in evaluating the separation, including, among others, the potential loss of synergies, dedication of resources to replicate certain technology applications and infrastructure, time and effort required to be dedicated to this transaction by the management of CIT and C2 and the potential diversion of their attention away from their respective businesses, the types of increased costs that would result from operating C2 as a separate public entity (such as those relating to an independent board of directors, compliance with regulatory and stock exchange requirements and increased fees for financial auditing, insurance coverage and tax compliance), the types of one-time costs that would be incurred in effectuating the separation (such as investment banking and other professional service fees, asset transfer and liability management costs, and expenses related to the establishment of separate facilities, systems and operations and an independent board of directors), and the risk of not realizing the anticipated benefits of the separation and limitations placed on C2 as a result of the tax matters agreement, but concluded that the potential benefits of the separation significantly outweighed these factors. For additional information, see the section entitled "Risk Factors."

Formation of C2 Aviation Capital, Inc. and Internal Reorganization

        C2 was formed as a Delaware corporation on June 1, 2016, for the purpose of holding CIT's commercial aircraft leasing business. As part of the plan to separate the commercial aircraft leasing business from the remainder of its businesses, pursuant to the separation and distribution agreement,

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CIT plans to transfer the equity interests of certain entities that operate the commercial aircraft leasing business and the assets and liabilities of the commercial aircraft leasing business to C2 prior to the distribution. Following the distribution, CIT will continue to own CIT's other businesses.

When and How You Will Receive the Distribution

        With the assistance of [    ·    ], CIT expects to distribute all of C2's outstanding common stock at 12:01 a.m., Eastern Time, on [    ·    ], the distribution date, to all holders of outstanding shares of CIT common stock at the close of business on [    ·    ], the record date for the distribution. [    ·    ] will serve as the settlement and distribution agent in connection with the distribution and the transfer agent and registrar for C2 common stock.

        If you own CIT common stock at the close of business on the record date for the distribution, C2 common stock that you are entitled to receive in the distribution will be issued electronically, as of the distribution date, to you in direct registration form or to your bank or brokerage firm on your behalf. If you are a registered holder, [    ·    ] will then mail you a direct registration account statement that reflects your shares of C2 common stock. If you hold your shares through a bank or brokerage firm, your bank or brokerage firm will credit your account for the shares. Direct registration form refers to a method of recording share ownership when no physical share certificates are issued to stockholders, as is the case in this distribution. If you sell CIT common stock in the "regular-way" market up to and including the distribution date, you will be selling your right to receive shares of C2 common stock in the distribution.

        Commencing on or shortly after the distribution date, if you hold physical share certificates that represent your shares of CIT common stock and you are the registered holder of the shares represented by those certificates, the distribution agent will mail to you an account statement that indicates the number of shares of C2 common stock that have been registered in book-entry form in your name.

        Most CIT stockholders hold their common stock through a bank or brokerage firm. In such cases, the bank or brokerage firm would be said to hold the shares in "street name" and ownership would be recorded on the bank or brokerage firm's books. If you hold your CIT common stock through a bank or brokerage firm, your bank or brokerage firm will credit your account for C2 common stock that you are entitled to receive in the distribution. If you have any questions concerning the mechanics of having shares held in "street name," please contact your bank or brokerage firm.

Transferability of Shares You Receive

        Except in connection with any contractual restrictions previously agreed to between an individual stockholder and CIT, shares of C2 common stock distributed to holders in connection with the distribution will be transferable without registration under the U.S. Securities Act of 1933, as amended (the "Securities Act"), except for shares received by persons who may be deemed to be C2 affiliates. Persons who may be deemed to be C2 affiliates after the distribution generally include individuals or entities that control, are controlled by or are under common control with C2, which may include certain C2 executive officers, directors or principal stockholders. Securities held by C2 affiliates will be subject to resale restrictions under the Securities Act. C2 affiliates will be permitted to sell shares of C2 common stock only pursuant to an effective registration statement or an exemption from the registration requirements of the Securities Act, such as the exemption afforded by Rule 144 under the Securities Act.

Number of Shares of C2 Common Stock You Will Receive

        For every [    ·    ] shares of CIT common stock that you own at the close of business on [    ·    ], the record date for the distribution, you will receive one share of C2 common stock on the distribution

53


date. CIT will not distribute any fractional shares of C2 common stock to its stockholders. Instead, if you are a registered holder, [    ·    ] (the distribution agent) will aggregate fractional shares into whole shares, sell the whole shares in the open market at prevailing market prices and distribute the aggregate cash proceeds (net of discounts and commissions) of the sales pro rata (based on the fractional share such holder would otherwise be entitled to receive) to each holder who otherwise would have been entitled to receive a fractional share in the distribution. The distribution agent, in its sole discretion, without any influence by CIT or C2, will determine when, how, and through which broker-dealer and at what price to sell the whole shares. Any broker-dealer used by the distribution agent will not be an affiliate of either CIT or C2. [    ·    ] is not an affiliate of either CIT or C2. Neither C2 nor CIT will be able to guarantee any minimum sale price in connection with the sale of these shares. Recipients of cash in lieu of fractional shares will not be entitled to any interest on the amounts of payment made in lieu of fractional shares.

        The aggregate net cash proceeds of these sales of fractional shares will be taxable for U.S. federal income tax purposes. See "Material U.S. Federal Income Tax Consequences" for an explanation of the material U.S. federal income tax consequences of the distribution. If you hold physical certificates for CIT common stock and are the registered holder, you will receive a check from the distribution agent in an amount equal to your pro rata share of the aggregate net cash proceeds of the sales. C2 estimates that it will take approximately two weeks from the distribution date for the distribution agent to complete the distributions of the aggregate net cash proceeds. If you hold your CIT common stock through a bank or brokerage firm, your bank or brokerage firm will receive, on your behalf, your pro rata share of the aggregate net cash proceeds of the sales and will electronically credit your account for your share of such proceeds.

Treatment of Equity Based Compensation

        Restricted Stock Unit Awards Held by C2 Employees.    As of the distribution date, each outstanding CIT Restricted Stock Unit ("RSU") award held by an employee who will be employed by C2 following the separation will be converted into an award denominated in shares of C2 common stock, with the number of shares subject to the award to be adjusted in a manner intended to preserve the aggregate intrinsic value of the original CIT RSU award as measured immediately before and immediately after the separation, subject to rounding. The adjusted RSU awards will be subject to substantially the same terms, vesting conditions and other restrictions that applied to the original CIT RSU award immediately before the separation.

        Restricted Stock Unit Awards Held by CIT Employees.    As of the distribution date, each outstanding CIT RSU award held by a current or former employee of CIT who will not be employed by C2 following the separation will remain denominated in shares of CIT common stock, provided that the number of shares subject to the award will be adjusted in a manner intended to preserve the aggregate intrinsic value of the original CIT RSU award as measured immediately before and immediately after the separation, subject to rounding. The adjusted RSU awards will be subject to substantially the same terms, vesting conditions and other restrictions that applied to the original CIT RSU award immediately before the separation.

        Performance Stock Unit Awards Held by C2 Employees.    As of the distribution date, each outstanding CIT Performance Share Unit ("PSU") award held by an employee who will be employed by C2 following the separation will be converted into an award denominated in shares of C2 common stock, with the number of shares subject to the award to be adjusted in a manner intended to preserve the aggregate intrinsic value of the original CIT PSU award as measured immediately before and immediately after the separation, subject to rounding. The performance goals applicable to the adjusted PSU awards will terminate as of the distribution date, and the number of shares eligible for vesting will be determined as follows: (a) for the period between the beginning of the applicable performance period and the distribution date, the number of shares will be determined based on actual performance

54


during such period and prorated based on the portion of the originally scheduled performance period elapsed through the distribution date; and (b) for the remainder of the originally scheduled performance period, the number of shares will be determined based on the target number of shares subject to the award and prorated based on the remaining portion of the originally scheduled performance period. Other than as described above, the adjusted PSU awards will be subject to substantially the same terms, vesting conditions and other restrictions that applied to the original CIT PSU award immediately before the separation.

        Performance Stock Unit Awards Held by CIT Employees.    As of the distribution date, each outstanding CIT PSU award held by a current or former employee of CIT who will not be employed by C2 following the separation will remain denominated in shares of CIT common stock, provided that the number of shares subject to the award will be adjusted in a manner intended to preserve the aggregate intrinsic value of the original CIT PSU award as measured immediately before and immediately after the separation, subject to rounding. The performance goals applicable to the adjusted PSU awards granted prior to 2016 will terminate as of the distribution date, and the number of shares eligible for vesting will be determined as follows: (a) for the period between the beginning of the applicable performance period and the distribution date, the number of shares will be determined based on actual performance during such period and prorated based on the portion of the originally scheduled performance period elapsed through the distribution date; and (b) for the remainder of the originally scheduled performance period, the number of shares will be determined based on the target number of shares subject to the award and prorated based on the remaining portion of the originally scheduled performance period. Other than as described above, the adjusted PSU awards will be subject to substantially the same terms, vesting conditions and other restrictions that applied to the original CIT PSU award immediately before the separation.

        Restricted Stock Unit Awards Held by Non-Employee Directors.    As of the distribution date, each outstanding CIT RSU award held by an individual in his or her capacity as a non-employee director of CIT will be converted into an award in respect of both shares of CIT common stock and shares of C2 common stock. The number of shares of CIT common stock subject to each award will be the same as the number subject to the award immediately prior to the separation, while the number of shares of C2 common stock subject to the award will be determined based on the number of C2 shares distributed per CIT share in the separation. The adjusted RSU awards will be subject to substantially the same terms, vesting conditions and other restrictions that applied to the original CIT RSU award immediately before the separation. CIT RSU awards that were granted to CIT's Chief Executive Officer, Ellen Alemany, in her capacity as a director of CIT (prior to her appointment as Chief Executive Officer) will also be adjusted in the manner contemplated by this paragraph.

        Stock Option Awards.    As of the distribution date, each outstanding CIT stock option award (all of which are held by non-employee directors of CIT) will remain an award of options to purchase shares of CIT common stock, provided that the number of shares subject to the award and the exercise price thereof will be adjusted in a manner intended to preserve the aggregate intrinsic value of the original CIT stock option award as measured immediately before and immediately after the separation, subject to rounding. The adjusted stock option awards will be subject to substantially the same terms, vesting conditions, post-termination exercise rules and other restrictions that applied to the original CIT stock option immediately before the separation.

Results of the Distribution

        After the distribution, C2 will be an independent, publicly traded company. The actual number of shares to be distributed will be determined at the close of business on [    ·    ], the record date for the distribution, and will reflect any exercise or vesting of CIT equity awards between the date the CIT board of directors declares the distribution and the record date for the distribution. The distribution

55


will not affect the number of outstanding shares of CIT common stock or any rights of CIT stockholders. CIT will not distribute any fractional shares of C2 common stock.

        C2 will enter into a separation agreement and other related agreements with CIT before the distribution to effect the separation and provide a framework for C2's relationship with CIT after the separation. These agreements will provide for the allocation between CIT and C2 of CIT's assets, liabilities and obligations (including its investments, property, employee benefits and tax-related assets and liabilities) attributable to periods prior to C2's separation from CIT and will govern the relationship between CIT and C2 after the separation. For a more detailed description of these agreements, see "Relationship with CIT Following the Separation and Distribution."

Market for C2 Common Stock

        There is currently no public trading market for C2 common stock. C2 expects to have its common stock approved to be listed on the NYSE under the symbol "CTWO." C2 has not and will not set the initial price of its common stock. The initial price will be established by the public markets.

        C2 cannot predict the price at which its common stock will trade after the distribution. In fact, the combined trading prices, after the distribution, of the shares of C2 common stock that each CIT stockholder will receive in the distribution and CIT common stock held at the record date for the distribution may not equal the "regular-way" trading price of CIT common stock immediately prior to the distribution. The price at which C2 common stock trades may fluctuate significantly, particularly until an orderly public market develops. Trading prices for C2 common stock will be determined in the public markets and may be influenced by many factors. See "Risk Factors—Risks Related to Our Common Stock."

Incurrence of Debt

        C2 anticipates having approximately $[    ·    ] of outstanding indebtedness upon the completion of the separation, and is targeting an equity to asset ratio of not less than [    ·    ]% following the recapitalization to be effectuated as part of the separation. See the sections entitled "Description of Material Indebtedness" and "Risk Factors—Risks Related to Our Business and Operations."

Trading Between the Record Date and Distribution Date

        Beginning on or shortly before the record date for the distribution and continuing up to and including the distribution date, CIT expects that there will be two markets in CIT common stock: a "regular-way" market and an "ex-distribution" market. CIT common stock that trades on the "regular-way" market will trade with an entitlement to C2 common stock distributed pursuant to the separation. CIT common stock that trades on the "ex-distribution" market will trade without an entitlement to C2 common stock distributed pursuant to the distribution. Therefore, if you sell CIT common stock in the "regular-way" market up to and including the distribution date, you will be selling your right to receive C2 common stock in the distribution. If you own CIT common stock at the close of business on the record date and sell that stock on the "ex-distribution" market up to and including the distribution date, you will receive the shares of C2 common stock that you are entitled to receive pursuant to your ownership as of the record date of CIT common stock.

        Furthermore, beginning on or about the record date for the distribution and continuing up to and including the distribution date, C2 expects that there will be a "when-issued" market in its common stock. "When-issued" trading refers to a sale or purchase made conditionally because the security has been authorized but not yet issued. The "when-issued" trading market will be a market for C2 common stock that will be distributed to holders of CIT common stock on the distribution date. If you owned CIT common stock at the close of business on the record date for the distribution, you would be entitled to C2 common stock distributed pursuant to the distribution. You may trade this entitlement to

56


shares of C2 common stock, without CIT common stock you own, on the "when-issued" market, but your transaction will not settle until after the distribution date. On the first trading day following the distribution date, "when-issued" trading with respect to C2 common stock will end and "regular-way" trading will begin.

Conditions to the Distribution

        C2 has announced that the distribution will be effective at 12:01 a.m., Eastern Time, on [    ·    ], which is the distribution date, provided that the following conditions shall have been satisfied (or waived by CIT in its sole discretion):

    the transfer of assets and liabilities from CIT to C2 shall have been completed in accordance with the separation agreement;

    CIT shall have received an opinion from CIT's outside tax counsel to the effect that the requirements for tax-free treatment under Sections 355 and 368(a)(1)(D) of the Code should be satisfied;

    an independent appraisal firm acceptable to CIT shall have delivered one or more opinions to the board of directors of CIT at the time or times requested by the board of directors of CIT confirming the solvency and financial viability of CIT before the consummation of the distribution and each of CIT and C2 after consummation of the distribution, such opinions shall be acceptable to CIT in form and substance in CIT's sole discretion, and such opinions shall not have been withdrawn or rescinded;

    the SEC shall have declared effective C2's registration statement on Form 10, of which this information statement forms a part, and this information statement shall have been made available to CIT stockholders;

    all actions and filings necessary or appropriate under applicable U.S. federal, U.S. state or other securities laws shall have been taken and, where applicable, have become effective or been accepted by the applicable governmental authority;

    the transaction agreements relating to the separation shall have been duly executed and delivered by the parties;

    any required regulatory approvals of the separation and distribution including by the Board of Governors of the Federal Reserve System shall have been obtained and shall remain in full force and effect;

    the incurrence of at least $[    ·    ] of new indebtedness by C2 and the determination by CIT in its sole discretion that as of the effective time of the distribution, it shall have no further liability under any of the C2 financing arrangements described under the section entitled "Description of Material Indebtedness," other than as expressly agreed between CIT and C2;

    no order, injunction, or decree issued by any court of competent jurisdiction or other legal restraint or prohibition preventing the consummation of the separation, distribution or any of the related transactions shall be in effect;

    the shares of C2 common stock to be distributed shall have been approved for listing on the NYSE, subject to official notice of distribution; and

    no event or development shall have occurred or exist that, in the judgment of CIT's board of directors, in its sole and absolute discretion, makes it inadvisable to effect the separation, the distribution and other related transactions.

57


        CIT cannot assure you that any or all of these conditions will be met and will have sole discretion to waive any of the conditions to the distribution. In addition, CIT will have the sole and absolute discretion to determine (and change) the terms of, and whether to proceed with, the distribution and, to the extent it determines to so proceed, to determine the record date for the distribution and the distribution date and the distribution ratio. CIT may rescind or delay its declaration of the distribution even after the record date for the distribution. C2 is not aware of any known circumstances in which the distribution would be terminated at a time after the CIT board of directors has declared the distribution and all of the conditions to the distribution are satisfied, other than unexpected positive developments in CIT's exploration of a sale of its commercial aircraft leasing business that occur after the CIT board of directors has declared the distribution. Following the time at which the CIT board of directors has declared the distribution and all of the conditions to the distribution have been satisfied, such unexpected positive developments could include the emergence of a new bidder, or the receipt of an improved proposal from a potential acquiror with whom CIT has previously engaged in discussions. However, there are a number of risks related to C2's business and operations, the separation and our common stock, the realization of which could result in CIT determining not to proceed with the distribution. See Risk Factors beginning on page 24. CIT is not required to and does not intend to notify its stockholders of any modifications to the terms of the separation and distribution that, in the judgment of its board of directors, are not material. For example, the CIT board of directors might consider material such matters as significant changes to the distribution ratio, the assets to be contributed or the liabilities to be assumed in the separation. To the extent that the CIT board of directors determines that any modifications by CIT materially change the material terms of the separation and distribution, CIT will notify CIT stockholders in a manner reasonably calculated to inform them about the modification as may be required by law, by, for example, publishing a press release, filing a current report on Form 8-K, or circulating a supplement to this information statement.

Regulatory Approval

        In addition to the registration under United States federal securities laws of C2 common stock to be distributed in the distribution and related stock exchange listing requirements, it is anticipated that certain aspects of the separation and distribution will require the prior approval of the Board of Governors of the Federal Reserve System.

No Appraisal Rights

        Under the DGCL, CIT stockholders will not have appraisal rights in connection with the distribution.

58



DIVIDEND POLICY

        We do not expect that we will initially pay a regular cash dividend. The timing, declaration, amount of and payment of any dividends by the company following the separation is within the discretion of our board of directors and will depend upon many factors, including our financial condition, earnings, capital requirements of our operating subsidiaries, any future debt service obligations, covenants associated with any of our future debt service obligations, legal requirements, regulatory constraints, industry practice, ability to gain access to capital markets, and other factors deemed relevant by our board of directors.

59



CAPITALIZATION

        The following table sets forth our cash and cash equivalents and capitalization as of June 30, 2016 on a historical and a pro forma basis to give effect to the separation and distribution and the transactions related to the separation and distribution as if they occurred on June 30, 2016. Explanation of the pro forma adjustments made to our historical combined financial statements can be found under "Unaudited Pro Forma Combined Financial Statements." The following table should be reviewed in conjunction with "Unaudited Pro Forma Combined Financial Statements," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our historical combined financial statements and accompanying notes included elsewhere in this information statement.

 
  As of June 30, 2016
(Dollars in thousands)
 
 
  Historical   Pro Forma  

Cash:

             

Cash and cash equivalents

  $ 130,943   $    

Restricted cash and cash equivalents

    537,456        

Total cash and cash equivalents

  $ 668,399   $    

Debt:

             

Borrowings from secured financing, net of debt issuance costs

  $ 1,926,448   $    

Notes payable to related parties

    1,560,008        

Total debt

  $ 3,486,456   $    

Equity:

             

Common stock, par value [·]

  $   $    

Additional paid-in capital

           

Parent Company Net Investment

    6,932,725        

Accumulated Other Comprehensive Income

    (16,569 )      

Total equity

  $ 6,916,156   $    

Total Capitalization

  $ 10,402,612   $    

        We have not yet finalized our post-distribution capitalization. We intend to update our financial information to reflect our post-distribution capitalization in an amendment to this information statement.

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SELECTED HISTORICAL COMBINED FINANCIAL DATA

        The following table presents selected historical combined income statement data of C2 for the years ended December 31, 2015, 2014, 2013, 2012 and 2011 and the six months ended June 30, 2016 and 2015, and selected historical combined balance sheet data as of June 30, 2016 and 2015, and December 31, 2015, 2014, 2013, 2012 and 2011. The selected historical combined income statement data for the six months ended June 30, 2016 and 2015, and for the years ended December 31, 2015, 2014 and 2013 and the selected historical combined balance sheet data as of June 30, 2016, December 31, 2015 and December 31, 2014 are derived from C2's unaudited Interim Condensed Combined Financial Statements and audited Annual Combined Financial Statements (together, the "Combined Financial Statements"), which are included elsewhere in this information statement. The selected historical combined balance sheet data as of June 30, 2015, December 31, 2013, 2012 and 2011 and the selected historical income statement data for the years ended December 31, 2012 and 2011 are derived from our unaudited underlying financial records which are not included in this information statement. Our underlying financial records were derived from the financial records of CIT for the periods reflected herein. The historical results may not necessarily reflect our results of operations, financial position and cash flows for future periods or what they would have been had we been a separate, stand-alone company during the periods presented. To ensure a full understanding of this selected financial data, the information presented below should be reviewed in combination with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the Combined Financial Statements and accompanying notes thereto included elsewhere in this information statement.

        The selected historical combined financial data include certain expenses of CIT that were allocated to C2 for certain corporate functions including information technology, research and development, finance, legal, insurance, compliance and human resources activities. These costs may not be representative of the future costs C2 will incur as an independent, publicly traded company. In addition, C2's historical financial information does not reflect changes that C2 expects to experience in the future as a result of C2's separation from CIT, including changes in C2's capital structure, funding mix, expense and employee base and tax structure. C2's Annual and Interim Combined Financial Statements also do not reflect the assignment of certain assets and liabilities between CIT and C2 as reflected under "Unaudited Pro Forma Combined Financial Statements" included elsewhere in this information statement. Consequently, the financial information included here may not necessarily reflect what C2's financial position, results of operations and cash flows would have been had it been an independent, publicly traded company during the periods presented. Accordingly, these historical results should not be relied upon as an indicator of C2's future performance.

        For a better understanding, this section should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the "Unaudited Pro Forma Combined Financial Statements" and accompanying notes and the Interim and Annual

61


Combined Financial Statements and accompanying notes included elsewhere in this information statement.

 
  Six months
ended June 30,
   
   
   
   
   
 
 
  Year ended December 31,  
 
  2016
(Unaudited)
  2015
(Unaudited)
 
Select Data (dollars in thousands)
  2015   2014   2013   2012   2011  

Summary of Income:

                                           

Total Revenues

  $ 641,125   $ 596,999   $ 1,190,205   $ 1,203,342   $ 1,106,286   $ 1,158,880   $ 1,112,135  

Depreciation on flight equipment

  $ 222,314   $ 196,643   $ 397,832   $ 374,497   $ 321,347   $ 302,201   $ 264,030  

Total Expenses

  $ 491,706   $ 444,943   $ 902,074   $ 822,880   $ 784,066   $ 1,345,478   $ 1,100,565  

Provision (benefit) for income taxes

  $ 18,173   $ 13,865   $ (85,258 ) $ 26,352   $ 31,732   $ 26,510   $ 41,585  

Net income (loss)

  $ 139,516   $ 144,515   $ 385,662   $ 361,845   $ 300,258   $ (223,021 ) $ (57,287 )

Financial Position at Period End:

   
 
   
 
   
 
   
 
   
 
   
 
   
 
 

Cash and cash equivalents

  $ 130,943   $ 216,984   $ 150,839   $ 336,795   $ 146,566   $ 87,957   $ 181,013  

Restricted cash and cash equivalents

  $ 537,456   $ 480,478   $ 498,271   $ 627,714   $ 529,167   $ 481,808   $ 272,296  

Finance leases and loans, net of allowance for credit losses

  $ 344,833   $ 383,274   $ 365,508   $ 401,043   $ 158,150   $ 314,536   $ 409,286  

Flight equipment held for operating leases, net of accumulated depreciation

  $ 9,685,548   $ 8,786,907   $ 9,734,789   $ 8,917,738   $ 8,230,656   $ 8,067,057   $ 8,193,231  

Flight equipment held for sale

  $ 92,803   $ 243,804   $ 34,654   $ 391,554   $ 148,681   $ 171,702   $ 49,406  

Total Assets

  $ 11,948,455   $ 11,117,710   $ 11,804,725   $ 11,568,307   $ 10,188,315   $ 9,901,491   $ 9,749,713  

Borrowings from secured financing, net of debt issuance costs

  $ 1,926,448   $ 2,231,495   $ 2,091,567   $ 2,354,946   $ 2,305,264   $ 2,494,943   $ 2,264,920  

Notes payable to related parties

  $ 1,560,008   $ 909,958   $ 1,500,547   $ 1,311,280   $ 989,433   $ 596,008   $ 241,499  

Total Parent Company Net Investment

  $ 6,916,156   $ 6,505,872   $ 6,698,081   $ 6,439,532   $ 5,474,410   $ 5,429,072   $ 5,959,759  

Other:

   
 
   
 
   
 
   
 
   
 
   
 
   
 
 

Number of aircraft owned

    307     293     305     300     278     278     276  

Number of aircraft on order

    132     151     139     152     147     161     162  

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UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS

        The following Unaudited Pro Forma Combined Financial Statements are derived from the historical Combined Financial Statements of C2, prepared in accordance with U.S. generally accepted accounting principles ("GAAP"), which are included elsewhere in this information statement.

        The Unaudited Pro Forma Combined Income Statements for the fiscal year ended December 31, 2015 and the six months ended June 30, 2016 give effect to the distribution as if it had occurred on January 1, 2015, the first day of the last fiscal year. The Unaudited Pro Forma Combined Balance Sheet as of June 30, 2016 gives effect to the distribution as if it had occurred on June 30, 2016, the latest balance sheet date. These Unaudited Pro Forma Combined Financial Statements include adjustments required by SEC Staff Accounting Bulletin Topic 1:B-3 and Article 11 of SEC Regulation S-X, including the following:

    a.
    the inclusion of [    ·    ] of debt at an expected weighted average interest rate of [    ·    ]%;

    b.
    the pro-rata distribution of approximately [    ·    ] shares of C2 common stock to CIT stockholders;

    c.
    the dividend by C2 of approximately $[    ·    ] to CIT;

    d.
    the assets and liabilities that were not included in C2's Unaudited Interim Combined Financial Statements; and

    e.
    the impact of the separation agreement, tax matters agreement, employee matters agreement and other commercial agreements between C2 and CIT.

        The Pro Forma Financial Statements may not reflect all of the costs of operating as a stand-alone company, including possible different information technology, tax, accounting, treasury, legal and other similar expenses associated with operating as a stand-alone company. Only costs that management has determined to be factually supportable and recurring are included as pro forma adjustments.

        Our historical Combined Financial Statements included elsewhere in this information statement include intercompany charges for corporate shared services. After the separation and the distribution, certain services will continue to be provided by CIT under the transition services agreement. This agreement is more fully described under the section entitled "Relationship with CIT Following the Separation and Distribution—Transition Services Agreement."

        Subject to the terms of the separation agreement, CIT will pay certain non-recurring third-party costs and expenses related to the separation. Such non-recurring amounts will include investment banker fees, outside legal and accounting fees and similar costs. After the separation, subject to the terms of the separation agreement, all costs and expenses related to ongoing support of a stand-alone company, including certain one-time separation costs incurred after the distribution date, will be our responsibility.

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C2 Aviation Capital, Inc.
(A Business of CIT Group Inc. and Subsidiaries)
Unaudited Pro Forma Combined Statement of Income
For the six months ended June 30, 2016
(Dollars in thousands)

 
  Historical
C2
  Pro Forma
Adjustments
  Note   Pro Forma
Combined
 

Revenues

                       

Lease rental revenue, net

  $ 611,989                  

Finance lease and interest revenue, net

    12,554                  

Gain on disposal of flight equipment, net

    11,202                  

Other revenue

    5,380                  

Total Revenue

    641,125                  

Expenses

                       

Depreciation on flight equipment

    222,314                  

Impairment of flight equipment

    210                  

Interest expense, net

    171,327         1        

Provision for credit loss

    5,171                  

Operating lease expense

    21,549                  

Selling, general and administrative expenses

    71,135         2        

Total Expenses

    491,706                  

Other Income

    5,287                  

Income before income taxes and income of investments accounted for under the equity method

   
154,706
                 

Provision for income taxes

   
(18,173

)
     

3

       

Share of earnings from unconsolidated equity investment, net of tax

    2,983                  

Net income

  $ 139,516                  

See Notes to Unaudited Pro Forma Combined Financial Statements

64



C2 Aviation Capital, Inc.
(A Business of CIT Group Inc. and Subsidiaries)
Unaudited Pro Forma Combined Statement of Income
For the year ended December 31, 2015
(Dollars in thousands)

 
  Historical
C2
  Pro Forma
Adjustments
  Note   Pro Forma
Combined
 

Revenues

                       

Lease rental revenue, net

  $ 1,119,830                  

Finance lease and interest revenue, net

    27,471                  

Gain on disposal of flight equipment, net

    36,367                  

Other revenue

    6,537                  

Total Revenue

    1,190,205                  

Expenses

                       

Depreciation on flight equipment

    397,832                  

Impairment of flight equipment

    8,038                  

Interest expense, net

    335,124         1        

Reduction to provision for credit loss

    (2,478 )                

Operating lease expense

    45,788                  

Selling, general and administrative expenses

    117,770         2        

Total Expenses

    902,074                  

Other Income

    9,076                  

Income before income taxes and income of investments accounted for under the equity method

   
297,207
                 

Benefit for income taxes

   
85,258
       

3

       

Share of earnings from unconsolidated equity investment, net of tax

    3,197                  

Net income

  $ 385,662                  

See Notes to Unaudited Pro Forma Combined Financial Statements

65



C2 Aviation Capital, Inc.
(A Business of CIT Group Inc. and Subsidiaries)
Unaudited Pro Forma Condensed Combined Balance Sheet
As of June 30, 2016
(Dollars in thousands)

 
  Historical
C2
  Pro Forma
Adjustments
  Note   Pro Forma
Combined
 

Assets

                       

Cash and cash equivalents

  $ 130,943         4   $    

Restricted cash and cash equivalents

    537,456                  

Finance leases and loans, net of allowance for credit losses

    344,833                  

Flight equipment held for operating leases, net of accumulated depreciation

    9,685,548                  

Flight equipment held for sale

    92,803                  

Deposits on flight equipment purchases

    764,574                  

Goodwill

    112,500                  

Other intangibles, net of accumulated amortization

    14,635                  

Notes receivable from related parties

    84,538                  

Unconsolidated equity method investment

    58,594                  

Other assets

    122,031         5        

Total Assets

    11,948,455         6        

Liabilities

                       

Accounts payable, accrued expenses and other liabilities

    276,300         5, 7        

Rentals received in advance

    52,919                  

Security deposits

    164,255                  

Maintenance reserves

    1,052,369                  

Borrowings from secured financing, net of debt issuance costs

    1,926,448         8        

Notes payable to related parties

    1,560,008         8        

Total Liabilities

    5,032,299         6        

Stockholders' Equity

                       

Common stock: $0.01 par value

            9        

Paid-in capital

            9        

Parent company net investment

    6,932,725         9        

Accumulated other comprehensive loss

    (16,569 )       9        

Total Equity

    6,916,156                  

Liabilities and Equity

  $ 11,948,455             $    

See Notes to Unaudited Pro Forma Combined Financial Statements

66



C2 Aviation Capital, Inc.
(A Business of CIT Group Inc. and Subsidiaries)

NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
(Dollars in thousands)

        

1
The adjustment to our historical interest expense for the six months ended June 30, 2016 and the fiscal year ended December 31, 2015 to give effect to the issuance of $[    ·    ] of [    ·    ]% debt in connection with the separation is presented below. The estimation of interest below is based on a review of a number of factors including credit rating considerations, forecasted liquidity and capital and statutory income tax rates.

 
  Six
Months
Ended
June 30,
2016
(In millions)
  Year Ended
December 31,
2015
(In millions)
 

Interest on $[·] of borrowings

  $ [·]   $ [·]  

Amortization of debt issuance costs and commitment fees on borrowings

   
[
·]
   
[
·]
 

Total pro forma adjustments to interest expense

 
$

[
·]
 
$

[
·]
 

    For each 1/8 percent variance in the applicable interest rates in excess of [    ·    ] rate, pro forma interest expense would change by approximately $[    ·    ] on an annual basis.

2
Reflects the elimination of non-recurring separation costs of approximately $[    ·    ] and $[    ·    ] for the six months ended June 30, 2016 and the fiscal year ended December 31, 2015, respectively, related to the separation and distribution that were incurred during the historical period. These costs were primarily for legal, tax and accounting fees, and other related expenses. The separation costs are expected to be non-deductible for tax purposes, and separation costs were taxed at [    ·    ]% based on the blended federal and statutory income tax rates.

3
The income tax effects of pro forma adjustments are recorded at the applicable statutory tax rates, resulting in an overall tax impact of $[    ·    ] and $[    ·    ] on the unaudited pro forma combined statement of operations for the six months ended June 30, 2016 and the fiscal year ended December 31, 2015, respectively.

4
Reflects a cash contribution from CIT to C2 on or prior to the Distribution date of $[    ·    ].

5
An adjustment of $[    ·    ] represents a change in the net deferred tax liability due to the addition and removal of tax attributes to/from the historical C2 balance sheet due to C2's use of the 'separate return methodology' in computing the standalone financial statements. As a result, certain tax attributes that were reflected in C2's Combined Financial Statements may not be inherited by C2 following the separation from CIT. This also captures certain tax attributes not reflected in C2's Combined Financial Statements which will be inherited by C2 following the separation from CIT.

6
Reflects adjustments for assets or liabilities that are to be transferred to C2 from CIT and assets or liabilities to be transferred to CIT from C2, in connection with the separation. These include [    ·    ]. The contributed assets or liabilities were not included in the historical Combined Financial Statements as these assets or liabilities were not discretely identifiable to C2.

7
Reflects the portion of employee liabilities that relate to, and will be retained by / transferred from CIT.

67


8
The adjustment to borrowings reflects the incurrence of approximately $[    ·    ] in debt, net of $[    ·    ] in debt issuance costs, in conjunction with C2's separation from CIT.

9
The adjustment to common stock, paid-in capital and Parent company net investment represents: (a) the elimination of approximately $[    ·    ] of Parent company net investment and accumulated other comprehensive income and (b) the establishment of our capital structure. For purposes of these unaudited pro forma combined financial statements, we assumed approximately [    ·    ] shares of C2 common stock were issued at a par value of $0.01 per share determined using the distribution ratio of one share of C2 common stock for every [    ·    ] shares of CIT common stock, and [    ·    ] shares of CIT common stock outstanding at June 30, 2016. The preceding information presented in tabular form is as follows:

Eliminate Parent company net investment and accumulated other comprehensive income in C2 to reflect distribution of C2 common stock to CIT's stockholders

  $ [·]  

Common stock, $.01 par value; [·] shares issued using the distribution ratio of one share of C2 common stock for every [·] shares of CIT common stock, and [·] shares of CIT common stock outstanding at June 30, 2016

    ([·] )

Pro forma recapitalization of C2 equity—additional paid-in capital

  $ [·]  

68



INDUSTRY

Introduction

        The information and data contained in the "Industry" section of this information statement has been provided in a June 2016 report by AVITAS, Inc. ("AVITAS"), an international aviation consulting firm. AVITAS has advised us that this information and the resulting analysis is drawn from multiple sources, including Penton Aviation Week Fleet database, Euromoney Fleet Analyst, CAPA Fleets, the International Monetary Fund, International Air Transport Association, National Bureau of Economic Research, U.S. Energy Information Administration, Airbus and Boeing company reports, and AVITAS' proprietary databases and analyses. AVITAS has also advised us that some of the information from these sources, including AVITAS' database, is derived from estimates or subjective judgments and such information may differ from the information in the databases of other aircraft data collection agencies or industry sources. The historical and projected information in this "Industry" section that is not attributed to specific sources is derived from AVITAS' internal analyses, estimates, and subjective judgments.

Overview

        AVITAS believes that air travel is a growing industry with strong prospects over the long-term and that the aviation business is a vital component of the world economy. It has remained resilient while enduring the effects of both business cycle downturns and external events. According to the International Air Transport Association ("IATA"), the global aviation industry supports around 59 million jobs and $2.2 trillion in economic activity. Air travel has penetrated most areas of the world, with the highest growth in air traffic coming from emerging markets and economies—predominantly in the Asia Pacific region, led by China and India. In addition, there is a current need to replace aging fleets in the mature markets of North American and Europe. To satisfy these requirements for aircraft replacement and traffic growth, the commercial aircraft manufacturers are delivering 1,500+ aircraft per year. As of June 30, 2016, the commercial air industry is served by approximately 25,000 aircraft operated by more than 700 scheduled airlines carrying more than three billion passengers per year.

        Passenger traffic, as measured by revenue passenger kilometers ("RPKs"), has grown on an average annual basis of 5.5% over the last 20 years and is expected to continue to expand in the next 20 years. Almost one percent of the world's gross domestic product ("GDP") will be spent on air transport in 2016, totaling almost $750 billion. The industry is cyclical and significantly related to measures of economic activity such as GDP and disposable income. Presently, because of lower fuel prices, new revenue opportunities, and consolidation of carriers, worldwide airlines have become profitable and, according to IATA, are expected to produce net profits of $39.4 billion in 2016 which would mark the seventh consecutive year of profits. These profits cut across all major regions of the world with North American domiciled airlines having the largest share.

        Airlines in mature markets are in the midst of a major aircraft re-fleeting exercise while economic expansion in emerging markets is driving growth. This growth and aircraft replacement dynamic has created large order backlogs at Boeing and Airbus as airlines seek to upgrade their fleets with the new technology offered in the current generation of jets and engines. For Boeing and Airbus alone, orders number more than 12,000 aircraft units which are expected to be delivered over the next decade. AVITAS expects that the manufacturers will deliver 35,000 commercial aircraft over the next 20 years. This growth is unprecedented in the commercial airline industry.

        The aircraft operating lessor market has grown significantly since it was first developed in the 1970s and 80s. Aircraft lessors offer value to both manufacturers (by distributing aircraft, influencing design standards, and contributing additional demand) and airlines (by reducing capital outlay requirements, enhancing fleet planning flexibility, and eliminating residual value risk). Today, they own or manage almost 40% of the commercial airline fleet, up from about 12% in 1990, according to

69


Boeing. The market for operating lessors is competitive, segmented by two mega-size lessors, a cohort of approximately a half-dozen mid-size lessors, and at least 80 smaller lessors. New entrants have emerged—some from emerging markets—and there have been ownership changes for several of the well-established lessors as new owners are attracted by the investment potential for aircraft leases.

        Overall, values of aircraft depend on demand and supply considerations. AVITAS believes that aircraft owners can expect several more years of aircraft market values to be above their long-term trends for most widely-held aircraft models, whether narrowbody, intermediate widebody or large widebody aircraft.

Relationship between the Economy and Passenger Traffic

        Growth in the air transport industry is closely correlated to the economy. Economic changes as measured by the growth or contraction of GDP can determine changes in passenger activity and in turn, the need for aircraft. Though cyclical, the aviation market is often generally explainable by economic factors. Under favorable economic conditions, travel typically increases for both business and leisure reasons. During periods of economic downturn, air travel usually slows. Unpredictable events, like terrorism or disease, have a temporary negative impact on air travel which is usually short-lived and/or regional in nature. Overall, the air transport industry has grown at a solid pace in spite of multiple business cycle downturns and extraordinary events that have negatively impacted demand for air travel. Today, air travel is common worldwide and there is steady growth in passenger traffic. The greatest traffic development has occurred in emerging markets, where the impact of air travel growth is represented by new airlines and new infrastructure.

        An analysis of historical data shows a strong positive correlation between changes in world GDP and changes in passenger traffic, as shown in Figure 1. Passenger traffic is measured using RPKs, which each represent one kilometer traveled by a paying customer.

Figure 1

World GDP Growth & World RPK Growth
1990 - 2015 (Estimated for 2015)

GRAPHIC


Source: IATA, USDA Economic Research Service, World Bank

70


        On an annual basis, RPK growth is generally a multiple of GDP growth. The average annual RPK growth to annual GDP growth multiple has been 1.6 times over the last 25 years on a worldwide basis. This relationship between GDP growth and RPK growth forms the basis for worldwide aircraft demand forecasting.

        The multiple varies by geographic region. Emerging markets generally have a high RPK growth to GDP growth ratio. These regions have more potential new customers and new markets. The multiple can also be influenced by the entry of new competitors in a market and the resulting additional growth as evidenced by the effect of low cost carriers ("LCCs") that have prospered in Europe and Asia. LCCs have attracted new customers to air travel by offering low fares and providing new routes that had previously been ignored or uneconomical. RPKs have grown at a rate that far exceeds the economic growth in these regions.

        The airline industry has demonstrated robust growth in terms of both aircraft and passenger traffic as depicted in Figure 2. Over the last 45 years, passenger traffic has grown at an average annual rate of 6.0%, while the in-service passenger jet fleet has grown at an annual rate of 4.2%. Growth in passenger traffic drives the need for additional aircraft capacity.

        The effect of the business cycle is apparent in the chart, as passenger traffic (depicted by the RPK line) declines or softens in recessionary periods. Passenger traffic has historically been resilient, however, with passengers returning at a faster rate after a downturn and traffic recovering to its long-term trend. Indeed, even with two of the most significant downturns in the market (September 11, 2001 and the "Great Recession" that began in 2008), passenger traffic has doubled since 2001. Aircraft inventory, on the other hand, has trended upward consistently regardless of the economic cycle, as many aircraft are delivered during downturns despite reduced passenger travel.

Figure 2

Aircraft In Service Fleet and Passenger Traffic

GRAPHIC


Source: AWIN and ICAO

71


Aircraft Leasing Market

        AVITAS believes that the operating lessor market is strong and growing. Lessors have taken a larger share of an expanding commercial aircraft fleet, driven by airlines' concentration on operations and the desire to avoid outright ownership of aircraft assets. By owning fewer aircraft assets, airlines mitigate their exposure to residual value risks, lower their capital investment, take on less balance sheet risk, and create a higher level of flexibility in their fleet plans. Operating lessors seed the market by facilitating fleet acquisition at airlines that otherwise could not obtain aircraft. This expansion helps develop passenger traffic with geographically diverse airlines. Lessors attempt to mitigate downside risk by entering into long-term lease agreements with airlines around the world, which enables lessors to continue with lease stream revenue through economic downturns.

        AVITAS expects the growth pattern for operating leasing to continue in the medium and long-term through both direct purchases from aircraft manufacturers and through sale-leasebacks from the airlines. As the industry has grown, operating lessors have also grown—both in absolute and relative size and their importance to the industry.

        Leasing has become popular with a substantial number of airlines irrespective of size or business model. Traditional network carriers, low cost airlines, and startup airlines take advantage of the leasing market. During the recessions of 2001 and 2008-2009, while many banks and traditional lenders were limiting their exposure in aircraft financing, operating lessors continued to supply aircraft to the airlines.

        The following figure demonstrates the growth of both the overall passenger jet aircraft fleet and aircraft on operating lease.

Figure 3

Total Aircraft Passenger Jet Fleet
Operating Lease vs. All Others

GRAPHIC


Source: CAPA Fleets, AVITAS estimates

        The overall passenger jet fleet has doubled in the last 20 years and as of March 2016 totals approximately 25,000 aircraft. The operating leased share of the fleet has grown at a faster pace over that period, increasing almost three-fold to about 9,000 aircraft, which is about 40% of the current total fleet. According to AVITAS, the outlook for the leased fleet is for continued growth. Over the next decade, according to some estimates, the operating leased fleet may approach 50% of the total aircraft fleet in service.

        The number of operating lease companies has increased in recent years, a function of the opportunities that the aircraft leasing market has created. However, the large leasing companies control the vast majority of the aircraft fleet and its corresponding value. The following figure indicates the top 25 operating lessors in aircraft fleet units as of December 2015.

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Figure 4

Global Operating Lessors Top 25 Ranking
by Fleet Size
      Aircraft      
  Ranking   Company   Units    
1   GECAS   1,585    
2   AERCAP   1,237    
3   SMBC AVIATION CAPITAL   428    
4   CIT AEROSPACE   339    
5   BBAM AIRCRAFT LEASING   328    
6   NORDIC AVIATION CAPITAL   282    
7   AVIATION CAPITAL GROUP   276    
8   AIR LEASE CORPORATION   275    
9   BOC AVIATION   264    
10   AWAS   258    
11   AVOLON   237    
12   MACQUARIE AIRFINANCE   223    
13   ICBC LEASING   200    
14   CDB LEASING   134    
15   JACKSON SQUARE AVIATION   130    
16   AIRCASTLE   129    
17   ORIX AVIATION   128    
18   PEMBROKE   118    
19   BOCOM LEASING   109    
20   VEB LEASING   84    
21   FLY LEASING   80    
22   DAE AEROSPACE   72    
23   MC AVIATION PARTNERS   71    
24   CHINA AIRCRAFT LEASING COMPANY   58    
25   DORIC   41    

Sources: Euromoney Fleet Analyst for owned and managed aircraft as of Dec 31, 2015; AVITAS estimates

        While there are a total of more than 100 aircraft operating lease companies, the top 25 lessors control almost 90% of the total leased fleet. The top 21 lessors had a total of almost 3,000 aircraft on order at the end of 2015.

        The lessor space is both large and growing and, according to AVITAS, can accommodate multiple strategies. Size does matter however, as AVITAS believes lessors with sufficient scale can have better access to capital, higher cash flows, better profit margins and a diversified aircraft fleet strategy which allows for placement of various aircraft types across the world.

        There has been some notable activity in the lessor space recently as market dynamics for lessors have strengthened. These include:

    a merger agreement between Avolon and Bohai Leasing Co., Ltd.

73


    a joint venture formed between CIT and CTL

    a joint venture formed between Aircastle and IBJL (a Japanese leasing company owned by Mizuho Financial Group)

    BOC Aviation's partial public listing

    Aviation Capital Group's announcement of potential partial public listing

    Acquisition of helicopter lessor Milestone Aviation by GECAS; and

    International Lease Finance Corporation's sale by AIG to AerCap Holdings

        Lessors' financial profiles have been strengthened by the improved performance and profitability across the airline sector. The aircraft leasing market is now fundamental to the airline industry and AVITAS expects that it will continue to grow as leasing will remain an attractive financing option for airlines. Moreover, through operating lessors, airlines can focus on their core business and can have flexibility in their aircraft fleet plans while avoiding residual value risk.

Regional Analysis

        The projections for future passenger development vary by geographic region. Much of long-term passenger traffic growth is expected to be underpinned by growth in demand from emerging markets in Asia Pacific, Latin America and the Middle East. The figure below shows the historical and projected pace of growth in each region, based on data from IATA and AVITAS forecasts. According to AVITAS, Asia still has the largest untapped potential for traffic growth due to the emergence of large developing economies and an enormous population base. In comparison, the North American and European markets are mature, with subdued growth projected. AVITAS expects growth in the Middle East will stay strong due to its strategic location linking Europe and Asia.

Figure 5


World Airlines Passenger Traffic, 1970 - 2034

GRAPHIC


Source: IATA, AVITAS forecast

74


        A look at historical fleet development by world region as depicted in Figure 8 can also help illustrate the differences in the geographic markets. The flattening shape of the North American and European curves shows the maturity of those regional markets while the strong upswing of fleet growth in the Asia Pacific region reflects the recent growth of emerging economies in that region.

Figure 6

Active Fleet Development by World Region
1996-2015

GRAPHIC


Source: AWIN

        The following sections give a brief description of the economic and passenger traffic growth prospects for each of the world regions, based on AVITAS' analysis.

    North America

        According to AVITAS, the North American market is a mature market where passenger growth is consistent with economic growth. Overall RPK growth was 3.4% in 2015 while economic growth was 2.3%.

        The U.S. market has consolidated to four major airlines (American, Delta, Southwest, and United) which serve over 80% of passengers. There are a handful of smaller LCCs and a sophisticated regional carrier operation that supplements the operations of the major airlines. Some smaller carriers have considered merging to better compete in this market. The proposed merger of Alaska Airlines and Virgin America is a recent example.

        The slower growth rate of this market means that there is likely limited potential for new entrants. Regional jets have historically accounted for much of the fleet growth in the North American market while the narrowbody and widebody proportions have stayed relatively flat as major airlines outsourced routes to regional carriers. Recently these airlines have been up-gauging out of regional jets to larger aircraft as oil prices have been low and passenger growth has improved. As of April 2016, the order book for the region shows firm orders for 2,391 narrowbody jets, 253 intermediate widebody jets

75


(aircraft from 225 to 350 seats), 110 large widebody jets (greater than 350 seats), and 489 regional jets. Note that some of the ordered aircraft in North America are with operating lessors based in the region. Of the total number of aircraft in service in this region, about 25% of aircraft are on operating lease.

    Europe

        Slow growth in the European economy overall has not had a negative impact on the air passenger market as recent low oil prices and the strength of LCCs have stimulated demand. Overall RPK growth was 5.1% in 2015 even as the economy grew by 1.3%. While the European market has seen solid growth despite being considered a mature market, AVITAS believes it is unclear whether this level of growth can be sustained.

        Although the European market is similar to that of North America in its maturity, the commercial aviation sector in Europe is more fractured, with a larger number of carriers competing in the region. The large airlines in Europe do not have the market clout of the consolidated North American carriers. In addition, the effect of LCCs in Europe has been significant, with carriers such as easyJet and Ryanair taking a considerable portion of short-haul passenger traffic away from legacy carriers. In response, the European legacy carriers have consolidated into large airline groups with multiple airlines under one company umbrella while also pursuing growth of their LCC subsidiaries to better compete in this market.

        Passenger fleet size in Europe has been relatively flat as the growth in LCCs has been offset by the decline of numerous airlines in the region. Some legacy airlines are struggling in this competitive environment and lack the resources to grow their fleets.

        Narrowbodies currently dominate the landscape in the European aviation market due to the presence of LCCs, large numbers of high density short-haul routes, and the lack of a regional carrier structure similar to the U.S. market. AVITAS expects that dominance to continue as the April 2016 order book contains firm orders for 2,306 narrowbody jets, 317 intermediate widebody jets, 100 large widebody jets, and 194 regional jets in this region. Overall, operating lessors own about 50% of the in-service fleet.

    Asia Pacific

        The Asia Pacific region has become one of the largest markets for air travel and continues to expand as it experiences record air passenger growth. RPKs grew 8.6% in 2015 while economic growth in the region was 4.5%.

        China is a major source of growth in this region. According to IATA, almost 70,000 flights a week operate to, from or within China which is about 10% of the global total. The number of civil airports grew from 94 in 1990 to 210 in 2015 and continues to increase. AVITAS believes that with its large population and relatively high economic growth rate, China has the potential for much additional development of its aviation market. CAPA reports that the four main Chinese airlines—Air China, China Eastern, China Southern and Hainan—have orders for many widebody aircraft as they seek to expand their presence in long-haul markets. Their combined orders equal nearly 50% of their current widebody fleets and the vast majority (85%) consist of intermediate widebody aircraft.

        Another large emerging economy in the region that AVITAS believes has significant potential is India. With just over 2% of its population participating in air travel, it is currently the 9th largest aviation market and is growing rapidly. IATA predicts India to become the 3rd largest aviation market by 2026 behind China and the U.S. and some studies have that occurring as soon as 2020.

        Asia has experienced tremendous fleet growth, as both passenger traffic and aircraft fleets have increased with economic expansion. One large driver for fleet development in Asia has been the growth of LCCs in Southeast Asia. North Asia is only beginning to experience the LCC phenomenon and

76


related growth. LCC penetration in China is low and, consequently, AVITAS believes that potential LCC development represents an area for significant growth in the country.

        The April 2016 order backlog shows a healthy order book in all segments with orders placed for 4,119 narrowbody jets, 548 intermediate widebody jets, 225 large widebody jets, and 362 regional jets. According to AVITAS, the significant size of Asia's population, growing economic strength, and significant investment in transportation infrastructure explains why the region dominates the order book compared with the rest of the world. Operating lessors own about 44% of the commercial aircraft fleet in service in Asia.

    Rest of the World

        Other regions of the world present a mixed outlook for aviation. In Latin America, many economies are struggling with the effects of reduced demand and lower prices for commodities. However, this has not yet hampered passenger traffic growth. AVITAS expects that there will be great potential for additional future growth when economic conditions improve.

        A mixture of different economic situations are creating uncertainties in the Middle East region. Some countries that are heavily dependent on oil revenues have been adversely affected by low prices. There are also areas embroiled in political and social conflict. However, the Middle East has recently seen some of the world's largest gains in passenger traffic, mainly due to the significant expansion of the "Big Three" carriers: Emirates, Etihad and Qatar.

        Africa has grown steadily, but the growth has started from a very low base. AVITAS expects Africa's current level of economic development to limit growth potential in the short- to medium-term. In addition, the region is hampered by underdeveloped infrastructure, limiting potential new routes.

Airline Profitability

        The net profits of the airline industry as a whole have been positive since 2010 and strong for the last several years. Aggregate airline profitability rose to an estimated $35.3 billion in 2015, up from $13.7 billion the previous year. IATA's June 2016 forecast for 2016 is $39.4 billion. According to IATA, carriers in North America had earnings of $21.5 billion in 2015 and are expected to reach $22.9 billion in 2016. European carriers had earnings of $7.4 billion for 2015 and are estimated to make $7.5 billion in 2016. In the Asia Pacific region, the comparable figures are $7.2 billion in 2015 and $7.8 billion in 2016.

77


Figure 7

Annual Net Income of Major World Airlines

GRAPHIC


Source: ATA, ICAO and IATA

        It is important to understand the primary factors that affect the profitability of the airline industry because it has historically produced volatile returns. According to AVITAS, some of the important influences are:

    the economic business cycle;

    fluctuating fuel prices;

    the capital intensity of the industry;

    the relationships between airline management and employees;

    the competitive structure and intensity;

    capacity management; and

    currency exchange rates.

        Fuel costs can range from 15-40% of an airline's operating costs, depending on the price of oil and the airline's network structure. As a capital intensive industry with a strong fixed cost component and high barriers to entry, it is relatively difficult for new airlines to start or succeed in the market. Acrimonious relationships between airline management and employees can negatively affect profits via strikes or low productivity. Primarily in the U.S., but also in Europe and South America, airline consolidation has created efficiencies and eliminated excess capacity on some routes. Better utilization of aircraft has been made possible by improved yield management and load factor optimization. Currency exchange rates can also drive profits, as a significant percentage of an airline's cost base, such as leases and fuel purchases, are denominated in U.S. dollars while revenues are in local currencies.

78


        Growth or contraction within the aviation industry is strongly dependent upon swings in the economic cycle. Demand for commercial aircraft is supported by expansion in passenger air traffic which stems from the strength of economic activity. Airline profitability quickly erodes in a downturn but can take many years to turn positive after the economy recovers.

        A look at the long-term trend in average economic expansion cycles for the U.S. is a key element in monitoring the growth prospects for the air travel industry. The following figure illustrates this trend by portraying the historical expansions as measured in the months from trough to peak.

Figure 8

Economic Expansion—Months

GRAPHIC


Source: National Bureau of Economic Research (NBER)

        Over the 70-year period, there were 12 economic cycles in the United States, not including the current economic expansion period which began in mid-2009. Overall, the shortest cycles have generally been between one and four years, and the longest between seven and ten years. While each expansion cycle is unique, with different rates of growth, the growth periods have been getting longer. The average expansion period across the 12 cycles was 60 months, or 5 years. For the last three cycles, the average expansion period was 95 months, or about eight years.

        The current period, beginning in mid-2009, has produced 83 consecutive months of growth as of April 2016, making it the fourth longest cycle in more than 70 years. The current market cycle is characterized by strong growth in passenger traffic, sustained airline profitability, robust sales of new aircraft and lower fuel prices.

    Oil Price

        The price of fuel can be a critical driver of the aircraft and airline industry. Oil prices have been volatile over the past decade—reaching a peak of more than $140 per barrel in 2008 and remaining low in the recent past. AVITAS expects oil prices will stay in the $50-$80 range for the near future, barring an unforeseen crisis. The following figure illustrates the trend in the price of crude oil (Cushing, OK, WTI Spot Price FOB) since 1986.

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Figure 9

Monthly Crude Oil Price—Cushing, OK, WTI Spot Price FOB
1986 - 2016

GRAPHIC


Source: U.S. Department of Energy

        The current moderation in price levels has been attributed to increased oil production in several countries and weaker than expected performance in some regional economies which has led to dampened demand. Moderation in price levels has had a sizeable impact on airline finances: IATA has estimated that global fuel costs for commercial aviation were approximately $180 billion in 2015, representing more than one quarter of total expenses.

        The drop in fuel prices has been a significant boost to airlines and AVITAS believes is the major driver behind improved overall profitability. IATA believes that world airline fuel costs will fall again over the course of 2016. Overall fuel efficiency is expected to improve at a slower rate, however, due to less fuel efficient aircraft being kept in service longer than originally planned.

        The World Bank, IMF and U.S. Energy Information Administration ("EIA") also expect prices to be lower at the end of 2016 than at the end of 2015, followed by a slow increase in prices from the end of 2016 onward. The EIA expects crude prices to increase slightly in 2017 to just over $50 per barrel. The World Bank sees crude oil reaching $80 by 2025. The IMF sees a much slower increase with prices still below $50 in 2020.

        Oil prices affect the profitability of airlines but also influence fleet composition. The uncertainty related to future prices drives aircraft and engine manufacturers to continue innovation in order to reduce fuel consumption and provide better aircraft economics. In a high fuel price environment, there is greater demand for these new technology products and retirements for older generation equipment may be accelerated. A lower price of oil may temporarily extend the operation of older, less efficient aircraft, thus delaying retirements. However, with current lower prices of oil and air traffic experiencing robust growth, the fleet requirements exceed what is provided by these delayed retirements and support increased new aircraft deliveries. Therefore, demand for new and used aircraft is expected to remain strong.

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Aircraft Supply and Demand

        There are many factors which affect the production levels for aircraft. The number of aircraft needed to meet passengers' demand for seats is determined by factors such as utilization rates (amount of hours flown), load factors (percentage of revenue seats divided by available seats), fleet retirements, order and backlog levels, and manufacturers' industrial capabilities.

    The Narrowbody Market

        The past decade has seen large increases in orders and the backlog for narrowbody aircraft, in particular the A320 and 737 families of aircraft. The unprecedented level of the backlog for these products has pushed the current manufacturers to increase production rates and has encouraged other companies to enter this market space with new product offerings. Given the popularity of narrowbody aircraft today, even a small amount of market share could translate to hundreds of potential orders for manufacturers who are new entrants.

        This increase in the backlog coincides with the rise of LCCs that have significantly extended air travel access in both developed and emerging markets, while taking significant passenger share away from the legacy carriers. In addition, the major carriers are also undergoing significant re-fleeting, retiring older narrowbodies and smaller regional jets for newer, larger, and more fuel efficient models.

Figure 10

Narrowbody Orders, Deliveries and Backlog

GRAPHIC


Source: AWIN

        The 150-180 seat aircraft has now become the most popular segment in the narrowbody sector. 150-180 seat aircraft offer a balance of passenger capacity while maintaining efficient operating costs. The dominance of the current A320 and 737-800 reflects the popularity of having an aircraft suited for this segment.

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        Both Airbus and Boeing have introduced successors to their popular A320 and 737 families. Airbus introduced the A320neo. Boeing responded with the 737 MAX. Both models will carry close to the same number of passengers as the current generation models, but both have been equipped with the latest advancements in technology and new engines that promise better fuel efficiency compared with their predecessors. As a result, a record number of orders have been placed for both models, and Airbus and Boeing are attempting to ramp up production to satisfy the backlog.

        A number of new entrants have sensed an opportunity to challenge these incumbent positions, or at least take a share of the narrowbody market. Both the Chinese-made Comac 919 and the Russian-made Irkut MS-21 are products under development that are of similar size to the A320 and the 737 families of aircraft. At this point in time, AVITAS believes that these aircraft are not seen by the existing manufacturers as imminent threats to their market dominance as neither of the aircraft are expected to sell well outside of their home markets.

        The smaller narrowbody market at around 100-130 seats has suffered as a result of up-gauging to larger aircraft types. However, Bombardier and Embraer have sensed an opportunity to make significant advances in this market. Bombardier has led the way with the C Series, which has taken market share from the A319 and the 737-700. The C Series is on the smaller end of the scale for narrowbodies, with the CS100 seating around 108 passengers in a two-class layout, and the larger CS300 with around 130 seats. Embraer has introduced the E195-E2, a stretched version of the E190-E2, which can seat around 120 passengers in a two-class layout, and shares commonality with the rest of the EJet family.

        Both Bombardier and Embraer have struggled with orders, a reflection of how the market has shifted to the larger narrowbodies. Bombardier has recently had some success with large order commitments from Air Canada and Delta, putting the future of its C Series on a firmer footing. AVITAS believes that the lack of orders for the A319neo and 737 MAX 7 is an indication that these aircraft are no longer suited for the smaller narrowbody segment and the future of the A319neo and 737 MAX 7 models are currently in question. The figure below gives the firm orders for all narrowbody aircraft as of April 2016.

Figure 11

Firm Orders for Narrowbody Passenger Aircraft
as of April 2016
 
MODEL

  Firm Orders          
    737NG         1,246      
    737 MAX         3,110      
    A320ceo Family         1,000      
    A320neo Family         4,362      
    C Series         323      
    E-195 E2         90      
    C919         400      
    MC-21         181      
    Total         10,712      

Source: AWIN

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    Narrowbody Aircraft Forecast

        AVITAS uses a combination of economic forecasts and traffic forecasts to project the level of aircraft demand in the future. In the long-run, the demand for aircraft is assumed to be balanced with the supply of aircraft, so the process is to determine the supply of planes necessary to support the forecasted level of demand. This is determined using a combination of current fleet levels, fleet retirement forecasts, and the future delivery schedule. The price of oil can impact future demand by delaying fleet retirements as low prices extend the useful life of current generation aircraft.

        The following figure illustrates the expected deliveries and retirements for passenger jets in the narrowbody category over the next twenty years, according to the AVITAS forecast.

Figure 12

Demand for Narrowbody Passenger Jet
2015 to 2034

GRAPHIC


Source: AWIN, AVITAS forecast

    The Widebody Market

        The demand for widebody aircraft has been robust, characterized by segmentation in both aircraft size and range appealing to carriers of all spectrums. The backlog for widebodies has been steady since 2008 as a result of demand for new technology aircraft led by Boeing's 787 family of aircraft and Airbus' A350 and A330 families.

        Boeing and Airbus dominate the widebody landscape. Airbus currently dominates the very-large widebody market with the A380, which is the largest passenger aircraft and is used by airlines on high density, long-range and premium traffic routes. The current trend for most airlines, however, is in the intermediate twin-engine widebody segment, where Airbus and Boeing have been trying to capture market share by introducing new clean-sheet designs.

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        Figure 13 demonstrates the widebody aircraft landscape oriented by entry-into-service year versus the nominal seat configuration by aircraft type. The aircraft labeling is shaded by its service status.

Figure 13

Widebody Aircraft Competitive Landscape
Entry into Services vs. Capacity

GRAPHIC


Source: Airframe Manufacturers and AVITAS estimates

        As shown, the landscape is segmented by two seat classes. The major seat class is the intermediate size of widebody aircraft which is generally between 225 and 350 seats in a two to three-class configuration. It is this sector that has the largest number of aircraft in service and where there is major activity for new aircraft developments featuring new technology and efficiencies. There are about 4,000 widebody aircraft in passenger service today with approximately 3,000 of those in the intermediate class of widebodies. Additionally, more than 1,600 aircraft are on firm order in this class, almost 70% of the widebody order backlog.

        Boeing disrupted the market by introducing the technologically advanced 787. After years of development and production delays, there are now approximately 400 787s in service and a backlog of around 750 aircraft to be delivered. In addition to the 787, the 777 has been a reliable twin-engine workhorse for many airlines and Boeing is currently planning a successor to the current generation 777 with the new 777X family, slated to debut by the end of 2019.

        Airbus's response to Boeing's moves in the twin-engine widebody market was to introduce the A350, which entered service in 2014 and now has a substantial backlog. In addition, Airbus is developing an A330 replacement with the A330neo family of aircraft.

        The trend in the widebodies reflects the changes in the long-haul market. The prevalence, until recently, of higher oil prices made four-engine aircraft uneconomical to operate. The A380 has become a niche aircraft that only works on long-haul, high density routes with premium traffic, which AVITAS believes greatly limits the A380's potential. According to AVITAS, airlines have found the twin-engined widebodies to be much more economical to operate. The new generation of intermediate widebody aircraft have considerably more range than their predecessors, enabled by improved aerodynamics, the use of new materials, and improved engine efficiencies. The following figure provides the breakdown of widebody firm orders as of April 2016.

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Figure 14

Firm Orders for Widebody Passenger Aircraft
as of April 2016
 
MODEL

  Firm Orders          
    747         7      
    777         163      
    777X         306      
    787         751      
    A330ceo         146      
    A330neo         186      
    A350         755      
    A380         132      
    Total         2,446      

Source: AWIN

Figure 15

Widebody Orders, Deliveries and Backlog
Passenger and Freighter

GRAPHIC


Source: AWIN

    Widebody Aircraft Forecast

        The following figure illustrates the expected deliveries and retirements for passenger jets in the widebody category over the next twenty years, according to the AVITAS forecast.

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Figure 16

Demand for Widebody Passenger Jet
2015 to 2034

GRAPHIC


Source: AWIN, AVITAS forecast

Value and Lease Trends

        According to AVITAS, on an overall basis, aircraft values and lease rates are determined by market demand and market supply. Market demand is predicted based on traffic forecasts, which are driven in turn by economic cycles, together with productivity, utilization assumptions and load factor analysis. Market supply is projected by a retirement forecast based on aircraft economic life assumptions and fluctuations in the parked aircraft fleet, and the delivery forecast driven by the order/delivery pattern. Changes in aircraft values are the outcome of these movements in the demand for and supply of aircraft. These factors drive relative market values from a composite standpoint which can reveal generalized value trends.

        For specific aircraft types and models, an aircraft's value and its associated lease rate are determined by market conditions, the overall supply and demand for aircraft, and other factors, such as:

    type and age;

    number in service at a given point in time;

    number of airlines operating the aircraft;

    production status;

    size, capacity, and capability;

    number of aircraft that are currently parked or in storage (a result of either market conditions or an operator decision to park the aircraft, either temporarily or permanently); and

    life cycle duration, giving the potential of the aircraft type to be replaced by a newer model.

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        Performance against these criteria demonstrates market depth for the asset and thus the ease or difficulty in placing an aircraft with an operator.

        According to AVITAS, newer, in-production models with strong market penetration, good geographic dispersion, and a broad base of operators tend to hold their value better than older, out-of-production types. While all aircraft are expected to lose value during negative market conditions, aircraft with positive characteristics typically maintain a higher value and a higher lease rate over a longer period of time and with less price volatility.

        Lease rates are directly related to values and in fact, tend to be an early indicator of value movements as lease rates react more quickly to market dynamics. On average, lease rate changes precede value changes by six months to a year.

        A useful metric for analyzing value changes is an analysis of constant age aircraft. This metric shows rates of depreciation or appreciation for the same relative age of an aircraft asset over a long-term period. The following Figure shows values over time for a selection of narrowbody aircraft on a ten-year constant age basis. The values are taken from AVITAS's historical Blue Book data which is released twice per year (1st and 2nd half, with a special release made in 2001 following September 11 which is shown below as 2001-3).

Figure 17

Value Analysis of 10 Year Constant Age
Select Narrowbody Aircraft

GRAPHIC


Source: AVITAS Blue Book of Jet Aircraft Values

        The 737-700NG, 737-800NG, A319-100, and A320-200 are shown. These aircraft, ranging in size from 125 to 180 seats, dominate today's airline landscape as they comprise almost 70% of the current in-service fleet of narrowbody airplanes. Moreover, these aircraft tend to be the workhorses of the airline industry as they perform well across both network hub flow markets as well as in low-cost carrier systems. All major airlines and large LCCs have many of these aircraft in service.

        The 737-800NG has the least value volatility of the types reviewed, a function of a strong operator base along with one engine type which allows for very strong market liquidity. The A320-200 also has a very strong operator base but has two engine types (the V2500 from IAE and the CFM56 from CFM

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International) which can split the market and create value volatility. Nevertheless, both of these aircraft types have robust value behavior and represent strong investments.

        The 737-700NG and the A319NG are somewhat more volatile than their larger counterparts, a function of the market's migration to larger aircraft like the 737-800 and the A320. Consequently, these two aircraft types have experienced some value deterioration.

        Overall, the value data in the Figure illustrates that, in general, all aircraft types decline in value after a recession and then increase in value during a recovery period. Of note is that the values of the aircraft types shown have increased at varying degrees over the last three to four years as the result of a generalized recovery for aircraft assets from the financial downturn in 2008-2009. AVITAS expects this upward trend to continue for these aircraft types before peaking in 2018-2019 as the economy and air traffic continue to strengthen over the next several years.

        The next figure demonstrates value trends in the same manner for a select group of intermediate widebody aircraft: 767-300ER, A330-200, and the A330-300. As with the narrowbody aircraft, the aircraft are impacted by the economic cycle where value is typically lost during recessionary periods before recovering in subsequent expansions.

        Over the last three years and on balance, values for the A330-200 and A330-300 have been fairly consistent through the recovery period following the recession of 2008-2009. Both of these aircraft are popular with operators and operating lessors as they provide an efficient combination of size and range. They are popular in Asia, Europe, and the Middle East.

        All widebody aircraft have shown declines in the first half of 2016 due to a combination of softness in some international economies and the availability of cheap financing for new aircraft. Additionally, a large number of leased widebody aircraft are starting to come off lease and are being returned to lessors and manufacturers, which has caused a glut in the market for widebody airplanes. AVITAS expects this trend to reconcile in 2017 and, if oil prices remain relatively low and interest rates increase, widebody airplanes will rebound to their long term Base Value patterns.

        The value trend difference between the 767-300ER and the A330 aircraft is notable as the 767-300ER has seen significant value declines as a result of its older generational vintage and out-of-production status. It is now being replaced with the newest technologically advanced and fuel efficient aircraft models such as the 787 and A350.

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Figure 18

Value Analysis of 10-Year Constant Age
Select Widebody Aircraft

GRAPHIC


Source: AVITAS Blue Book of Jet Aircraft Values

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BUSINESS

Overview

        C2 is a leading global aircraft leasing company focused on acquiring, leasing and managing commercial aircraft. We have been a provider of financial solutions in the commercial aircraft industry for over 40 years, including being among the first providers of operating leases to airlines over 20 years ago. Our strategy is to maintain and grow our diversified portfolio of widely-operated commercial aircraft in order to generate attractive risk-adjusted returns throughout aviation industry cycles. As we have built our business to scale over many years, we have developed deep and long-standing relationships with airlines and aircraft manufacturers, which we use to anticipate demand for aircraft models and to control credit and concentration risk.

        Our managed and on-order portfolio of 471 aircraft as of June 30, 2016, includes 307 aircraft we currently own ("owned" aircraft), 27 aircraft owned by third parties and serviced by us ("serviced" aircraft), 132 aircraft we have committed to purchase ("on-order" aircraft) and five loans we have made that are secured by commercial aircraft ("financed" aircraft). Our owned and serviced portfolio of 334 aircraft makes us one of the world's five largest aircraft lessors by aircraft count as of June 30, 2016, according to Ascend Flightglobal Consultancy ("Ascend"). The total aggregate net book value of our aircraft portfolio was approximately $11 billion as of June 30, 2016, including owned and financed aircraft with an aggregate net book value of approximately $10 billion and serviced aircraft with an aggregate net book value of approximately $1 billion in the two entities that comprise our strategic relationship with CTL. The average age of our owned portfolio, weighted by net book value, was 5.9 years as of June 30, 2016. For the year ended December 31, 2015 and the six months ended June 30, 2016, we reported total revenues of $1.19 billion and $641 million, respectively, and net income of $386 million and $140 million, respectively.

        We actively manage our owned portfolio to include aircraft that we believe have a large number of existing or expected airline operators. As of June 30, 2016, our owned portfolio consisted of narrowbody models, which include the Boeing 737 series and the Airbus A320 series, and which represent approximately 75% of our owned portfolio by aircraft count; select intermediate widebody aircraft, which include the Boeing 787 series and the Airbus A330 and A350 series, and which represent approximately 17% of our owned portfolio by aircraft count; and regional aircraft, which include the Embraer EJet 175 series and the Bombardier CRJ900, and which represent approximately 8% of our owned portfolio by aircraft count. For a more detailed description of the classes of aircraft in our portfolio, see the section entitled "Management's Discussion and Analysis of Financial Condition and Results of Operations." Our on-order portfolio as of June 30, 2016 includes 132 aircraft, of which 130 are next-generation Airbus A320neo, A321neo, A330neo, A350-900, and Boeing 737-MAX and 787 family aircraft, which we believe are attractive assets due to the new levels of operating efficiency they will deliver.

        We are a global business headquartered in New York. Through our regional offices in New York, Ft. Lauderdale, Dublin and Singapore, we maintain local connectivity with customers and capital providers in North America, Latin America, Europe and the Asia Pacific region, respectively. We have a corporate support center in Livingston, New Jersey, and small offices in Seattle, Washington and Toulouse, France, where we oversee the manufacturing process for new aircraft we order from Boeing and Airbus, respectively. As of June 30, 2016, our customer base comprised approximately 100 customers in 49 countries.

        We generally lease our aircraft pursuant to net operating leases that require the lessee to pay for maintenance, insurance, taxes and all other aircraft operating expenses during the lease term. As lessor, we receive the investment benefits from, and assume the residual risk of, the aircraft. We select aircraft that we believe have a large universe of existing or potential operators. As a result, we believe that our aircraft will retain a more predictable residual value, have increased marketability and will be less

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susceptible to asset impairment risk. As of June 30, 2016, 100% of our leases are payable in U.S. dollars, with lease rates on substantially all of our leases fixed for the term of the lease. A typical initial lease term for aircraft we purchase from manufacturers is between eight and twelve years, which provides a high level of predictability to revenues. As of June 30, 2016, the average lease term remaining on the leases in our owned portfolio, weighted by the net book value of the aircraft, was 6.6 years.

        Our business model provides flexibility to adjust to market conditions and manage risk to produce consistent long-term performance throughout aviation industry cycles. We use multiple aircraft acquisition channels to grow, maintaining a strong core book of direct orders from original equipment manufacturers ("OEMs") while opportunistically engaging in sale-leaseback and other secondary market acquisitions. We believe our deep industry relationships and commitment to multiple acquisition channels enable us to both source transactions that are not broadly available to other lessors and work with OEMs to develop and market aircraft that best fit our customers' needs. We seek to lease our aircraft over long time horizons to airlines across many geographies. We believe that this approach to business selection helps mitigate our counterparty and credit risk, provides a broad network through which we can source additional opportunities, and serves as a framework to optimize value at different points during the aviation industry cycle.

        We have participated since 2014 in a strategic relationship with CTL through two corporate entities and have grown the partnership to include 27 aircraft as of June 30, 2016. The strategic relationship enhances our ability to lease aircraft to airlines by combining our aircraft leasing and servicing expertise and origination and marketing capabilities with CTL's knowledge and efficient capital. In addition, because we are paid a servicing fee to manage the assets owned by these entities, we generate fee income through the strategic relationship.

        We seek to proactively manage our portfolio in response to market conditions. We sell assets both to aircraft investors globally, with whom we maintain relationships, as well as to airline customers and other operating lessors. Aircraft sales facilitate management of portfolio concentrations (including allowing us to maintain a young fleet), provide ongoing liquidity in the portfolio, enable us to monetize value in our aircraft and are an effective tool for managing both asset residual value and lease remarketing risk. These portfolio management strategies have historically been successful in mitigating risk, and we have consistently reported net gains on sales of assets.

        To manage risks associated with our business, we have developed a comprehensive risk management platform that uses proprietary asset valuation systems and credit scoring processes. These systems, tools and models, combined with formal risk committees that meet regularly, inform our decision-making process. We seek to mitigate asset, credit and liability risks associated with owning and leasing aircraft through:

    diversification across geographies, aircraft technologies, airline business models and customers, with a particular focus on aviation industry trends affecting individual markets;

    a select investment focus on marketable aircraft types with deep bases of existing and potential operators;

    a consistent approach of entering into longer-term leases with airlines;

    management of the overall timing of lease and debt maturities;

    utilization of our technical expertise to order aircraft that are desirable to a broad universe of customers, ensure end-of-lease returns are in proper condition, and minimize downtime and cost associated with transitioning aircraft among lessees;

    management of funding to minimize exposure to interest rate risk, distribute debt maturities and match funding to new aircraft commitments; and

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    a comprehensive risk management framework.

        This combination of asset selection and robust risk management has contributed to above 99% average fleet utilization over the last three fiscal years.

        Our highly experienced executive leadership team is led by our CEO, C. Jeffrey Knittel, and our President, Anthony Diaz. Our senior leadership team has an average of over 18 years of experience in the aircraft leasing industry, covering several industry cycles, and deep and long-standing customer, lender, investor and OEM relationships.

Portfolio

        As of June 30, 2016, our managed and on-order portfolio consisted of 471 aircraft. Our managed portfolio includes 307 owned aircraft, 27 serviced aircraft and five financed aircraft. The serviced aircraft are serviced through our strategic relationship with CTL. Our owned portfolio of 307 aircraft, as of June 30, 2016, included 52 intermediate widebody aircraft, 229 narrowbody aircraft and 26 regional jets. The average age of our owned portfolio, weighted by net book value, is 5.9 years as of June 30, 2016.

        As of June 30, 2016, we have committed to acquire a total of 132 aircraft directly from Airbus and Boeing with a capital commitment of approximately $9.2 billion and with scheduled delivery dates through 2020. Our on-order portfolio as of June 30, 2016 includes 130 next-generation A320neo, A321neo, A330neo, A350-900, 737-MAX, and 787 family of aircraft.

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        As of June 30, 2016, our owned and on-order portfolios consisted of the following aircraft, for which we have, or upon delivery will have, the risks and benefits of asset ownership:

Manufacturer
  Aircraft Type   Owned
Portfolio
  On-Order
Portfolio
  Total  

Narrowbody

                       

Airbus

  A319-100     28         28  

Airbus

  A320-200     60         60  

Airbus

  A321 family     31     2     33  

Airbus

  A320/321neo         50     50  

Boeing

  737-800     54         54  

Boeing

  737 MAX 8         37     37  

Boeing

  737-900ER     17         17  

Boeing

  737-700     15         15  

Boeing

  757-200     8         8  

Embraer

  E190     10         10  

Embraer

  E195     6         6  

Intermediate Widebody

 

 

   
 
   
 
   
 
 

Airbus

  A330-200     25         25  

Airbus

  A330-300     15         15  

Airbus

  A330-900neo         15     15  

Airbus

  A350-900     2     12     14  

Boeing

  787-8     4         4  

Boeing

  787-9         16     16  

Boeing

  767-300ER     6         6  

Widebody

 

   
   
   
 

Regional

 

 

   
 
   
 
   
 
 

Bombardier

  CRJ 900     14         14  

Embraer

  E175     4         4  

Other

    8         8  

TOTAL

    307     132     439  

        The following table sets forth the scheduled delivery dates for our on-order portfolio as of June 30, 2016:

Manufacturer
  Model   Remainder
of
2016
  2017   2018   2019   2020   Total  

Airbus

  A321ceo     2                     2  

Airbus

  A320/321neo     1     13     25     11         50  

Airbus

  A330-900neo             5     4     6     15  

Airbus

  A350-900     2             3     7     12  

Boeing

  737 MAX 8                 20     17     37  

Boeing

  787-9         3     5     6     2     16  

Total

    5     16     35     44     32     132  

Leases and Lessees

        Our top five lessees by percentage of lease revenue for the year ended December 31, 2015 were American Airlines, Inc., Delta Airlines, Inc., Garuda Indonesia, Qantas Airways Limited and Virgin

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Blue Airlines Pty Limited. Individually, none exceeded 8% of our revenues and collectively, our top five lessees accounted for less than 26% of our revenues in 2015.

        We benefit from a diverse customer base with a broad geographic distribution. The following chart sets forth the distribution of our lessees by location of each lessee airline's principal place of business as of June 30, 2016, measured by net book value:

 
  (% net
book value)
 

Asia / Pacific

    39 %

U.S. and Canada

    24 %

Europe

    20 %

Latin America

    11 %

Africa / Middle East

    6 %

Total

    100 %

        The expiry of our leases is well distributed over time, with no more than 16% of our leases, measured by aircraft count, expiring in any single year. The following chart sets forth as of June 30, 2016, the number of leases that were scheduled to expire each year by aircraft count:

Year
  Number of
aircraft with
leases expiring
 

Remainder of 2016

    14  

2017

    27  

2018

    30  

2019

    33  

2020

    49  

Thereafter

    154  

Total

    307  

        Though we work closely with potential lessees and, where appropriate, develop innovative lease structures tailored to address their specific needs, most of our leases share some common characteristics, including the following:

    fixed lease terms;

    monthly payment in advance, which must be paid under all circumstances, including during periods in which an aircraft is not in operation due to maintenance or grounding;

    absolute and unconditional payment obligations by the lessee, which are not subject to deduction for any withholding, set-off, counterclaim, recoupment, defense or other right the lessee may have against us;

    indemnification obligations requiring lessees to indemnify us for certain tax liabilities relating to the leases and the aircraft, including value-added tax, other than withholdings that arise out of transfers of the aircraft to or by us, due to our corporate structure or due to our gross negligence;

    security deposits, maintenance reserves, return conditions, and other mechanisms to protect the contracted revenue and value of our portfolio;

    obligations that lessees pay for all maintenance, insurance, and other aircraft operational expenses during the lease term; and

    rental rate adjustments based on movements in market rates from contract signing to delivery.

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        Lessees are responsible for compliance with applicable laws and regulations with respect to the aircraft. Leases also typically contain extensive provisions regarding our remedies and rights in the event of a default by a lessee.

Competitive Strengths

        We believe we enjoy the benefits of a number of talents and assets, many of which have been developed over our history as an established industry leader.

        Top-five lessor, optimally balancing industry relevance and flexibility.    Our owned and serviced portfolio of 334 aircraft makes us one of the world's five largest aircraft lessors by aircraft count as of June 30, 2016, according to Ascend. We believe this position offers several advantages. On the one hand, we have sufficient size to engage in larger-scale transactions with both manufacturers and airlines, allowing us to purchase large and diverse portfolios of aircraft, source transactions that are not broadly available, and influence aircraft design standards. On the other hand, relative to the largest lessors, we are sufficiently nimble to quickly adjust to market conditions, manage risk throughout aviation industry cycles, maintain a young fleet, and diversify our exposures by customer, geography, OEM and aircraft type.

        In addition, we believe our size makes us influential to key external constituencies, including manufacturers, airlines and capital market participants. We have been placing direct orders with manufacturers for new aircraft since 1999. We have a history of engaging in strategic transactions with manufacturers, including serving as one of the launch customers of the A350, A320neo, A330neo, 787 and 737-MAX. Meanwhile, we have been a valued sale-leaseback buyer-lessor counterparty to airlines due to our willingness to participate in, and our ability to commit quickly to, large portfolio transactions, such as our 2014 sale-leaseback transaction in which we acquired 24 new aircraft from Delta.

        Diverse fleet of modern, widely-operated aircraft.    As of June 30, 2016, our owned fleet of 307 aircraft was comprised, by aircraft count, of 75% narrowbody models, 17% intermediate widebody models and 8% regional jet models. The average age of our owned portfolio, weighted by net book value, was 5.9 years, as of June 30, 2016. Our portfolio is structured to focus on aircraft models that have deep operator bases. For example, 737 family and A320 family aircraft are operated by a combined total of 632 passenger operators globally, as of June 30, 2016, according to Ascend. Consistent with our strategy of owning the most in-demand aircraft, these models comprise 67% of our owned portfolio as of June 30, 2016. We believe our focus on owning a modern, widely-operated portfolio makes our aircraft attractive to airlines and readily deployable at minimal expense into markets around the world and strengthens our ability to re-lease and sell aircraft at each stage of their useful lives.

        Deep, long-standing and valuable industry relationships.    As a result of our legacy of over 40 years of experience in aircraft financing, we have built relationships that have endured through all types of market conditions with both OEMs and our approximately 100 customers in 49 countries as of June 30, 2016.

        We believe our relationships provide us access to key decision makers at airframe and engine manufacturers and major airlines around the world, thereby enabling us to make prompt acquisitions of new aircraft, enter into new leases, and anticipate airlines' longer-term trajectories so as to tailor our fleet and leases to their specific needs. Additionally, we believe our relationships with airframe and engine manufacturers allow us to provide input into their airframe and engine designs to better meet the needs of our airline customers, which in turn enables us to assist those manufacturers in growing their customer bases.

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        In addition, we believe our airline relationships give us access to sourcing and leasing opportunities across the globe and throughout the aviation industry cycle. Our 2014 sale-leaseback transaction in which we acquired 24 new aircraft from Delta is just one example of the benefits of these relationships with our customers. Our relationships are similarly strong with OEMs. We have a long history of helping OEMs expand their businesses by placing OEM aircraft with airline customers who have never before operated such aircraft. We believe that the value we add for both airlines and OEMs will continue to reinforce these relationships.

        We expect that the aircraft leasing industry will continue to be relationship-driven, and airframe and engine manufacturers and our airline customers will continue to place a high value on the expertise and experience of our management team, which we believe will help us develop new relationships. At the same time, we plan to use our long-standing contacts to grow our business and continue to add value to both manufacturers and customers. We believe these relationships will help us maintain our leadership position in the aircraft leasing industry over time.

        Strong aircraft delivery pipeline.    Through our strategic and opportunistic approaches to acquiring aircraft and our strong relationship with airframe manufacturers, as of June 30, 2016, we have an on-order portfolio of 132 aircraft to be delivered through 2020, 130 of which are next-generation aircraft. We believe that our strong aircraft delivery pipeline over this period gives us the ability to provide airline customers with a comprehensive multiyear solution to their aircraft leasing and fleet needs. We believe this ability is a competitive advantage in developing, renewing and expanding customer relationships as we have new aircraft available for delivery during periods far earlier than most of our airline customers can obtain new aircraft directly from airframe and engine manufacturers.

        Long-standing business and highly experienced and proven management team with deep aviation and financial institution experience.    Our senior leadership team is led by CEO C. Jeffrey Knittel and President Anthony Diaz, each of whom has over 30 years of experience in the aircraft leasing industry, covering several industry cycles, and deep, long-standing customer, lender, investor and OEM relationships. Our team has been instrumental in building CIT's long-standing commercial air business into one of the largest aircraft lessors in the industry over the nearly 20 years that certain members of our senior management team have been together in various capacities.

Strategy

        Our objective is to build and maintain a balanced and diverse portfolio of attractive commercial aircraft while leveraging our industry relationships and successfully managing our credit and financing risk to deliver attractive risk-adjusted returns throughout aviation industry cycles. Key elements of our strategy to achieve these objectives are as follows:

        Maintain our leadership position in the aircraft leasing marketplace via steady investment into in-demand, modern and widely-operated aircraft.    Our investment strategy is focused on acquiring a fleet of aircraft with strategically diverse technology, capacity and flight capability characteristics that will remain in strong demand throughout industry cycles. Industry experts predict continued growth of the proportion of commercial aircraft under operating leases, and we believe that these favorable industry dynamics present a significant growth opportunity. Yet, we understand the cyclical nature of the aviation industry, and believe that consistent growth drives long-term performance across cycles. Our experience demonstrates that aircraft with a large universe of potential operators have strong long-term value retention characteristics and lower re-marketing risks. We plan to own aircraft that our customers can lease and operate without major upfront costs or significant deviations from their strategic goals. We believe that steadily growing a diverse and in-demand portfolio will enable us to generate stable cash flows over the long term through high utilization rates on attractive lease terms.

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        Leverage multiple aircraft procurement channels to optimize growth and performance through the aviation industry cycle.    We intend to continue to utilize multiple procurement channels to source aircraft. We plan to supplement our core acquisition strategy of direct orders from aircraft OEMs, which we believe will provide us with consistent growth, with select sale-leaseback transactions with airlines and opportunistic acquisitions from other lessors or financial institutions. We believe that the utilization of multiple aircraft procurement channels will provide us the flexibility to enhance our portfolio and performance through the cycle as each channel, to a varying degree, can be calibrated to react to, and increase opportunity from, prevailing market conditions.

        Direct Orders from Manufacturers.    As of June 30, 2016, we committed to acquire a total of 132 aircraft directly from Airbus and Boeing, representing all of our on-order portfolio as of that date. Our entire on-order portfolio scheduled for delivery in 2017 or later consists of next-generation aircraft. As of June 30, 2016, our orders include 2 A321ceo, 50 A320/321neo, 15 A330neo, 12 A350-900, 37 737 MAX and 16 787 family aircraft, which are scheduled for delivery between 2016 and 2020. We believe these orders are strategically important as they give us access to highly sought-after, current- and next-generation, fuel-efficient aircraft. We anticipate strong leasing demand from airlines over the course of the useful lives of these aircraft due to their broad appeal. We believe these delivery positions are attractively timed and have the potential to generate significant franchise value. Direct order acquisitions typically require significantly longer lead times than sale-leaseback transactions, generally ranging from four to eight years from the time of order to the scheduled delivery of the aircraft, and require us to make pre-delivery payments.

        Sale-Leaseback.    We opportunistically engage in sale-leaseback transactions as an acquirer when we believe the terms to be advantageous. Under this transaction structure, we commit to acquire either new aircraft that an airline has ordered directly from the OEM, or aircraft already in service, and lease the aircraft to the airline. The sale-leaseback channel provides us with flexibility to manage cycle risk and be responsive to market opportunities and conditions—allowing us to quickly align our portfolio with strategic growth areas and improve credit quality in anticipation of downward cycles. Sale-leaseback transactions are generally completed within nine to eighteen months from the date on which the contract is signed until the scheduled delivery of the aircraft. These transactions, which can range in size from single-aircraft acquisitions to large portfolios, allow us to grow our portfolio and add next-generation technology with limited risk in light of a known, committed lessee. They may also enable us to quickly execute strategic goals in response to changing market dynamics, such as increasing our exposure to stronger credit U.S. carriers whose credit quality is improving faster than carriers in other geographies due to consolidation. Further, such sale-leaseback portfolio transactions open up the possibility of "add-on" acquisitions of individual aircraft by reducing friction costs such that sellers may choose to engage with us exclusively rather than running a market-wide bidding process. As of June 30, 2016, we did not have any commitments to acquire aircraft through sale-leaseback transactions.

        Actively manage our lease portfolio to optimize returns and minimize risk through diversification.    In actively managing our aircraft portfolio, we seek to optimize returns and minimize risks by appropriately and prudently diversifying the types of aircraft we acquire, spreading out over a number of years the termination dates for our leases, achieving geographic diversification, and minimizing our exposure to customer concentration. Through our acquisition of desirable aircraft types with large sets of potential operators, we seek to maximize the mobility of our assets across global markets, which may allow us to achieve a high rate of lease placements on attractive lease terms. Our commitment to proactively selling aircraft facilitates management of our portfolio concentrations by providing ongoing liquidity, and managing asset residual value and lease remarketing risk. We have expertise across multiple disposition channels, including structured portfolio sales. We leverage our marketing expertise to add value throughout the sale process, as the majority of our historical sales have included an already signed lease with an operator, enabling us to realize better outcomes. Through the implementation of our diversification and sales strategies, we believe that we will be in a position to

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reduce our exposure to industry fluctuations over a particular period of time, economic fluctuations in a particular regional market, changes in customer preferences for particular aircraft, and the credit risk posed by a particular customer.

        Effectively manage risk over the long-term.    We aim to mitigate risk through aviation industry cycles by maintaining a diverse customer base and applying our proprietary risk management models, processes and expertise as we continuously evaluate our portfolio. With approximately 100 customers geographically distributed across 49 countries and, as of June 30, 2016, no single lessee accounting for more than 8% of our 2015 lease revenue, our business model mitigates the risk posed by the deteriorating credit of any individual customer or economic fluctuations in any particular regional market. Our diversity of aircraft types, focus on in-demand models, staggering of lease terms and matched financing reduce the risks posed by changes in preferences for particular aircraft and periodic downturns in lessee demand or broader financing markets. It is our practice to index new aircraft placements to swap rates, so that the lease rate will change in accord with interest rates until it is fixed upon delivery of the aircraft. We believe this practice helps to neutralize the effect of interest rate fluctuations on both us and the lessee during the lag time between aircraft placement and commencement of the lease upon aircraft delivery. Our experienced team uses proprietary analytical systems and credit scoring processes to forecast and identify credit and liability risks. Regular meetings between our risk group and members of other functional teams allow us to detect potentially problematic leases in advance of defaults. Our historical experience indicates that our philosophy of negotiating workouts as early as possible upon recognition of possible credit issues saves costs and mitigates risk. Because the majority of the aircraft in our fleet are models that are in demand, we are typically able to re-lease recovered assets quickly and avoid significant losses. We believe that these risk management practices will help drive our ability to deliver long-term returns.

Financing Strategy

        The successful implementation of our financing strategy is a critical component of the success of our business. The objective of our financing strategy is to provide the capital required to support our business and growth initiatives in a cost-efficient manner while mitigating risks relating to changes in market conditions.

        We intend to fund our business with future earnings and cash flow from operations and an appropriate balance of secured and unsecured debt which may include bank facilities, term loans, corporate bonds or notes, asset-backed facilities, including debt guaranteed by the ECA and Ex-Im, pre-delivery payment or warehouse facilities and other capital market products.

        We aim to operate our business with prudent liquidity and a well-capitalized balance sheet. We actively manage our debt maturity profile and interest rate exposure by generally seeking long-term, fixed rate debt facilities, which we believe best match the characteristics of our assets. We seek to identify markets and products with favorable and flexible terms, as well as to maximize the diversification of funding solutions and to reduce our reliance on any one market or financial institution. We intend to enter into certain financing arrangements prior to or concurrent with the separation. Upon completion of the separation, we expect to have approximately $[    ·    ] of outstanding indebtedness, and are targeting an equity to asset ratio of not less than [    ·    ]% following the recapitalization to be effectuated as part of the separation. If we enter into any such financing arrangements, they will be described in a subsequent amendment to this information statement.

Competition

        The aircraft leasing industry is highly competitive. We compete in leasing, re-leasing, purchasing and selling our aircraft with other aircraft leasing companies, including AerCap Holdings N.V., GE Capital Aviation Services, AirLease Corporation, BOC Aviation, Aviation Capital Group, and Avolon

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Holdings Ltd. We also may encounter competition from other entities that selectively compete with us, including airlines, aircraft manufacturers, financial institutions, aircraft brokers, special purpose vehicles formed for the purpose of acquiring, leasing and selling aircraft, and public and private partnerships, investors and funds, including private equity and hedge funds.

        The market for sale-leaseback transactions has become increasingly competitive in recent years. Competition for a leasing transaction is based principally upon lease rates, delivery dates, lease terms, reputation, management expertise, aircraft condition, specifications and configuration and the availability of the types of aircraft necessary to meet the needs of the customer. We also compete with other lessors for aircraft financing commitments, which can impact our ability to compete for a leasing transaction. Competition in the purchase and sale of used aircraft is based principally on the availability of used aircraft, price, the terms of the lease to which an aircraft is subject and the c