AIG unit sells 53 jets to Macquarie
By Narayanan Somasundaram |
April 15, 2010, Thursday
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Print Edition
Print Edition
THE aircraft leasing unit of bailed-out insurer American International Group has agreed to sell 53 passenger jets to Australia's Macquarie Group to raise a much-needed US$2 billion in cash.
International Lease Finance Corp, a top customer of Boeing and Airbus, said yesterday it was selling the aircraft, mostly 737s and A320s, for below their book value of US$2.3 billion.
The deal follows AIG's failed efforts to offload the entire ILFC business as part of a global asset sale program to pay back the United States taxpayer after a US$182.3 billion bailout during the height of the financial crisis.
For Macquarie Group, the deal hoists it to the top of the second tier of aircraft leasing with a total fleet of 186, prompting investors to suggest it will look to expand further and capitalize on the recovering Asia Pacific air travel market.
"We see this as a good acquisition given the price, above average credit quality as called out by the company and the scalable nature of the business," Citigroup analyst Wes Nason said.
"For them it makes sense to have self-sufficient, large divisions. The deal could mean they are open for expansion," said Angus Gluskie, a portfolio manager at White Funds Management.
AIG tried selling the ILFC business but a mountain of debt at the unit and the challenge to meet its ongoing funding requirements amid tough capital markets meant a deal was not reached.
Liquidity struggle
Instead it switched to aircraft sales to fund the unit and had said last month it was looking to sell planes for up to US$3.5 billion.
ILFC founder Steven Udvar-Hazy, who effectively invented the business of aircraft leasing, left the firm in February after failing to buy a portfolio of planes for US$4 billion.
Formed in 1973, ILFC was bought by AIG for US$1.3 billion in 1990. As part of AIG, ILFC for many years enjoyed easy funding, but its access dried up as its parent was brought to its knees by the financial crisis in September 2008.
"ILFC's ability to accomplish significant aircraft sales, together with recent successes in the financial markets, strongly demonstrates ILFC's ability to generate liquidity and de-lever its balance sheet," Chief Executive Alan Lund said.
By contrast, investment bank Macquarie is using the global downturn to pick up cheap assets. It said the deal would not make a major dent in its capital surplus.
International Lease Finance Corp, a top customer of Boeing and Airbus, said yesterday it was selling the aircraft, mostly 737s and A320s, for below their book value of US$2.3 billion.
The deal follows AIG's failed efforts to offload the entire ILFC business as part of a global asset sale program to pay back the United States taxpayer after a US$182.3 billion bailout during the height of the financial crisis.
For Macquarie Group, the deal hoists it to the top of the second tier of aircraft leasing with a total fleet of 186, prompting investors to suggest it will look to expand further and capitalize on the recovering Asia Pacific air travel market.
"We see this as a good acquisition given the price, above average credit quality as called out by the company and the scalable nature of the business," Citigroup analyst Wes Nason said.
"For them it makes sense to have self-sufficient, large divisions. The deal could mean they are open for expansion," said Angus Gluskie, a portfolio manager at White Funds Management.
AIG tried selling the ILFC business but a mountain of debt at the unit and the challenge to meet its ongoing funding requirements amid tough capital markets meant a deal was not reached.
Liquidity struggle
Instead it switched to aircraft sales to fund the unit and had said last month it was looking to sell planes for up to US$3.5 billion.
ILFC founder Steven Udvar-Hazy, who effectively invented the business of aircraft leasing, left the firm in February after failing to buy a portfolio of planes for US$4 billion.
Formed in 1973, ILFC was bought by AIG for US$1.3 billion in 1990. As part of AIG, ILFC for many years enjoyed easy funding, but its access dried up as its parent was brought to its knees by the financial crisis in September 2008.
"ILFC's ability to accomplish significant aircraft sales, together with recent successes in the financial markets, strongly demonstrates ILFC's ability to generate liquidity and de-lever its balance sheet," Chief Executive Alan Lund said.
By contrast, investment bank Macquarie is using the global downturn to pick up cheap assets. It said the deal would not make a major dent in its capital surplus.
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