Cut-price bids made for AIG’s aircraft unit

Listen to this article


International Lease Finance Corp has drawn a step closer towards separation from its troubled parent, insurer AIG, with three investment groups submitting bids to acquire the aircraft lessor for less than $5bn.

People close to the situation said one consortium was led by Thomas H. Lee Partners and Carlyle Group, while Onex and Greenbriar Equity Group headlined a second group. The third bidder’s identity could not be determined.

While the three bids may be considered to be low given ILFC’s book value of $7.6bn, they reflect the industry’s uncertain outlook, tough funding markets and AIG’s need to unload assets to repay $100bn in debt and equity to the US government. Nevertheless, the sale of ILFC, one of the most successful businesses in AIG’s sprawling portfolio, would represent the biggest disposal by the insurer since it was first bailed out by the US government last September.

AIG is likely to negotiate with the three groups for several weeks before presenting the winning bid to the New York Federal Reserve and US Treasury, which hold a stake of about 80 per cent in the insurer. AIG, the bidders and ILFC declined to comment.

The insurer’s near-collapse last September has limited ILFC’s access to cheap funding, which is considered critical for large lessors such as GE Capital, General Electric’s finance arm.

AIG has pledged to support ILFC until its sale. But the division’s efforts to raise several billion dollars through a new credit facility have met with tepid demand from European banks and other traditional sources of aviation finance, people familiar with the matter said.

Additional funding may come from the Fed, which has been in talks with ILFC to extend the company a $5bn loan, and from key aerospace manufacturers that have come to rely on ILFC.

The sources of capital have been viewed as vital to the sale process to assure would-be buyers that ILFC can endure the credit crisis and a brutal downturn in demand for air travel.

People familiar with the matter said that other banks might be willing to participate in the credit facility once a buyer emerges from the auction.

ILFC has ordered 168 aircraft worth $16.7bn from Boeing and Airbus.

The aircraft are scheduled to be bought during the next 10 years, with 49 of them – worth about $3bn – set to be delivered this year.

Copyright The Financial Times Limited 2017. All rights reserved. You may share using our article tools. Please don't copy articles from and redistribute by email or post to the web.