Air T, Inc. Announces Intent to Form New Aircraft Equity Vehicle

Rhea-AI Summary

Air T, Inc. (NASDAQ:AIRT) announced plans to create a new aircraft asset management business, Contrail Aircraft Management (CAM), and a joint venture, Contrail Fund II (CFII), with three investment firms. The new entity aims to raise approximately $108 million in equity to acquire, manage, and sell aircraft and engines. CAM will manage CFII, with a focus on whole aircraft acquisitions and part-out solutions. The anticipated formation is set for late January 2021, although finalization is contingent on further review and conditions.

Positive

• Formation of new aircraft asset management business and joint venture potentially increasing revenue streams.
• Initial equity capital projected at approximately $108 million, indicating strong investor interest.
• Air T's commitment to contribute approximately $8 million to CFII, aligning interests with investors.

Negative

• Formation and capitalization of the new business are conditional and may be delayed beyond the projected January 2021 timeline.
• Uncertainties regarding market conditions and investor capital commitments could affect future operations.

DENVER, NC / ACCESSWIRE / December 23, 2020 / Air T, Inc. (NASDAQ:AIRT) announced today that it has entered into letters of intent with three separate, large investment and asset management firms (the "Investors") to form a new aircraft asset management business to be called Contrail Aircraft Management ("CAM"), and a new aircraft capital joint venture to be called Contrail Fund II ("CFII"). The parties presently expect the new business and joint venture to be formed and capitalized by the end of January 2021. The new business and joint venture are being formed to purchase and sell aircraft and engines to be relet or disassembled and sold for parts. The parties anticipate that CFII will be capitalized initially with approximately $108,000,000 in equity capital and that it will establish a portfolio of aircraft assets, focusing on whole aircraft and engine acquisitions, sale-leaseback transactions and end of life part-out solutions. The capital contributed by the Investors -- presently anticipated to be approximately $100,000,000 -- will be contributed into CFII.

CFII will be managed by CAM and operate out of Contrail's business locations in Verona, Wisconsin and Denver, Colorado. CAM is expected to be owned ninety (90%) percent by Air T's subsidiary, Contrail Aviation Support, LLC ("CAS" or "Contrail") and ten (10%) percent by one of the Investors. CAM will be paid a management fee on invested capital, an origination fee on drawn capital, a disposition fee, and a carried interest over the target return. CAM will also be entitled to a consignment fee on end-of-life asset teardowns. It is anticipated that members of CFII will hold the right to contribute additional capital on the same economic terms (the "Upsize Commitment"). The Upsize Commitment is anticipated to exceed $250,000,000. Contrail intends to contribute approximately $8,000,000 of the initial capital committed to the fund as well, which is anticipated to lead to returns alongside the other investors.

The parties presently expect that the Investors will have veto rights and opt-out rights on transactions involving their capital. In addition, the joint venture plans on implementing an acquisition committee that will include independent members to oversee all transactions.

The business and joint venture transactions are not yet complete, and the equity capital has not yet been committed. In addition, the contemplated business and joint venture are subject to numerous other conditions and terms customary for transactions of this kind, including further due diligence review. While the parties project a commencement date in January 2021, such commencement may occur after this date and there is no assurance at this time that the formation of the business and joint venture, and commencement of operations, will occur.

ABOUT AIR T, INC.
Established in 1980, Air T Inc. is a portfolio of powerful businesses and financial assets, each of which is independent yet interrelated. Its core segments are overnight air cargo, aviation ground support equipment manufacturing, and commercial aircraft asset management and logistics. We seek to expand, strengthen and diversify Air T's after-tax cash flow per share. Our goal is to build Air T's core businesses, and when appropriate, to expand into adjacent and other industries. We seek to activate growth and overcome challenges while delivering meaningful value for all stakeholders. For more information, visit www.airt.net.

FORWARD-LOOKING STATEMENTS
Certain matters discussed in this press release may be considered forward-looking statements (as such term is defined in the Private Securities Litigation Reform Act of 1995). These forward-looking statements are subject to risks, uncertainties and assumptions about our operations and the investments we make, including, among other things, factors discussed under the heading "Risk Factors" in our 10-K, as well as the following:

• Conditions in the Company's markets;
• The ability of the Company and its business segments to generate sufficient cash flows from operations or through financings.
• The risk that contracts with FedEx could be terminated or adversely modified;
• The risk that the number of aircraft operated for FedEx will be reduced;
• The risks faced by commercial aircraft operators and maintenance, repair and overhaul companies because they are our customers.
• Our engine values and lease rates, which are dependent on the status of the types of aircraft on which engines are installed, and other factors.
• The Company and its customers operate in a highly regulated industry and changes in economic conditions, laws or regulations may adversely affect our ability to lease or sell our engines or aircraft.
• We may experience losses and delays in connection with repossession of engines or aircraft when a lessee defaults.
• The risk that customers or potential customers will defer significant orders for deicing equipment under contracts with GGS;
• The impact of any terrorist activities or protests on United States soil or abroad;
• The Company's ability to manage its cost structure and operating expenses, or unanticipated capital requirements, and match them to shifting customer service requirements and production or equipment volume levels;
• The risk of injury or other damage arising from accidents involving the Company's overnight air cargo operations, equipment or parts sold and/or services provided;
• Market acceptance of the Company's commercial and military equipment and services;
• Competition from other providers of similar equipment and services;
• Changes in government regulation and technology;
• Changes in the value of marketable securities held as investments; and
• Mild winter weather conditions reducing the demand for deicing equipment.
• The Company's ability to meet debt service covenants, obtain additional financing and to refinance existing debt obligations
• The length, severity and impact of the COVID-19 pandemic; and
• The risks and uncertainties related to business acquisitions (including the ability to successfully achieve anticipated benefits) inflation rates, competition, changes in technology or government regulation, debt covenants, information technology disruptions, and the impact of future terrorist activities in the United States and abroad.

Forward-looking statements can be identified by the use of words like "believes," "could," "possibly," "probably," "anticipates," "estimates," "projects," "expects," "may," "will," "should," "seek," "intend," "plan," "expect," or "consider" or the negative of these expressions or other variations, or by discussions of strategy that involves risks and uncertainties. All forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual transactions, results, performance or achievements to be materially different from any future transactions, results, performance or achievements expressed or implied by such forward-looking statements. We base these forward-looking statements on current expectations and projections about future events and the information currently available to us. Although we believe that the assumptions for these forward-looking statements are reasonable, any of the assumptions could prove to be inaccurate. Consequently, no representation or warranty can be given that the estimates, opinions, or assumptions made in or referenced in this press release will prove to be accurate. We undertake no obligation to update our forward-looking statements. We caution you that the forward-looking statements in this press release are only estimates and predictions, or statements of current intent. Actual results or outcomes, or actions that we ultimately undertake, could differ materially from those anticipated in the forward-looking statements due to risks, uncertainties or actual events differing from the assumptions underlying these statements. These risks, uncertainties and assumptions include, but are not limited to, those discussed in this press release.

CONTACT
Air T, Inc.
Brian Ochocki, CFO
bochocki@airt.net
612-843-4302

SOURCE: Air T, Inc.

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FAQ

What is Air T's new aircraft asset management business called?

Air T's new aircraft asset management business is called Contrail Aircraft Management (CAM).

What is the projected equity capital for Contrail Fund II (CFII)?

The projected equity capital for Contrail Fund II (CFII) is approximately $108 million.

When is Air T expecting to finalize the new business and joint venture?

Air T expects to finalize the new business and joint venture by the end of January 2021, subject to conditions.

How much will Air T contribute to the initial capital of Contrail Fund II?

Air T intends to contribute approximately $8 million to the initial capital of Contrail Fund II.