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AIG eyes leasing unit sale to Chinese team
Source: Agencies |
December 11, 2012, Tuesday
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Print Edition
Print Edition
AMERICAN International Group Inc is to sell nearly all of ILFC, the world's second-largest airplane leasing business, to a Chinese consortium for up to US$4.8 billion, giving the fastest growing aviation market easier and cheaper access to planes.
The Chinese consortium - made up of New China Trust, which is one-fifth owned by Barclays Plc, China Aviation Industrial Fund and P3 Investments Ltd, and advised by Credit Suisse - will buy 80.1 percent of ILFC for US$4.23 billion, with the option to buy another 9.9 percent. An arm of the Industrial and Commercial Bank of China , China's biggest bank, will join once the deal has regulatory approval.
Chinese firms have shown interest in aircraft leasing before, and the deal would give China access to a global network of about 200 airlines in 80 countries and regions. China is already ILFC's largest market with 180 planes operating there, giving it 35 percent market share.
"It's the biggest deal we have in the aircraft leasing world and it's very ambitious," said Paul Sheridan, head of Asia at aviation consultancy firm Ascend Advisor. "We believe there are not enough aircraft on order in China at the moment. It will help Chinese airlines get more aircraft."
The world's two largest planemakers - Airbus, owned by aerospace group EADS , and US rival Boeing - have predicted demand for US$4.5 trillion worth of passenger jets over the next two decades, with about two-thirds of new planes sold in the Asia-Pacific region, and China as the biggest single market in value terms.
Analysts say China tends to balance its orders between Airbus and Boeing. This means China pays an effective premium for planes as the two manufacturers don't have to compete as heavily for orders as they do elsewhere. ILFC's order books could mean cheaper planes for China, industry experts say.
US insurer AIG has said it will submit the offer for review by the US Committee on Foreign Investment, or CFIUS, which vets foreign agreements based on security concerns.
Chinese investments in some sectors have stirred a political backlash, but aircraft leasing is seen as less sensitive than investment in minerals or telecoms equipment.
"ILFC's portfolio is not heavily in the US. It's an American-owned asset, but a lot of their aircraft fly outside the US," said Ascend's Sheridan, adding he did not expect the US government agency to block the deal.
AIG received a US$182 billion US government bailout following the global financial crisis, and has been selling off the bulk of its Asian operations as part of a wider divestment plan so it can repay the government. In September, the US Treasury cut its AIG stake to below 16 percent of the outstanding shares from around 53.4 percent.
The Chinese consortium - made up of New China Trust, which is one-fifth owned by Barclays Plc, China Aviation Industrial Fund and P3 Investments Ltd, and advised by Credit Suisse - will buy 80.1 percent of ILFC for US$4.23 billion, with the option to buy another 9.9 percent. An arm of the Industrial and Commercial Bank of China , China's biggest bank, will join once the deal has regulatory approval.
Chinese firms have shown interest in aircraft leasing before, and the deal would give China access to a global network of about 200 airlines in 80 countries and regions. China is already ILFC's largest market with 180 planes operating there, giving it 35 percent market share.
"It's the biggest deal we have in the aircraft leasing world and it's very ambitious," said Paul Sheridan, head of Asia at aviation consultancy firm Ascend Advisor. "We believe there are not enough aircraft on order in China at the moment. It will help Chinese airlines get more aircraft."
The world's two largest planemakers - Airbus, owned by aerospace group EADS , and US rival Boeing - have predicted demand for US$4.5 trillion worth of passenger jets over the next two decades, with about two-thirds of new planes sold in the Asia-Pacific region, and China as the biggest single market in value terms.
Analysts say China tends to balance its orders between Airbus and Boeing. This means China pays an effective premium for planes as the two manufacturers don't have to compete as heavily for orders as they do elsewhere. ILFC's order books could mean cheaper planes for China, industry experts say.
US insurer AIG has said it will submit the offer for review by the US Committee on Foreign Investment, or CFIUS, which vets foreign agreements based on security concerns.
Chinese investments in some sectors have stirred a political backlash, but aircraft leasing is seen as less sensitive than investment in minerals or telecoms equipment.
"ILFC's portfolio is not heavily in the US. It's an American-owned asset, but a lot of their aircraft fly outside the US," said Ascend's Sheridan, adding he did not expect the US government agency to block the deal.
AIG received a US$182 billion US government bailout following the global financial crisis, and has been selling off the bulk of its Asian operations as part of a wider divestment plan so it can repay the government. In September, the US Treasury cut its AIG stake to below 16 percent of the outstanding shares from around 53.4 percent.
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