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AIG in Talks to Sell Control of Aircraft Leasing Unit

Source: WSJ

Posted on 07 Dec 2012 by Neilson

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AIG Leasing UnitAmerican International Group Inc. is in talks to sell a controlling stake in its plane-leasing unit to a Chinese-led consortium for more than $5 billion, according to a person with knowledge of the situation.

The move would mark the second time that the U.S. financial-services group has tried to sell all or part of its International Lease Finance Corp. unit, and it filed last year for an initial public offering of a business deemed as non-core.

The proposed sale of a controlling stake in ILFC, the world's second-largest jet leasing company by assets after the Gecas unit of General Electric Co.  would also be the latest in a string of Chinese investments in the U.S.-and among the largest.

The bidding group, led by New China Trust Co., also includes the Industrial & Commercial Bank of China Ltd., or ICBC, and the China Aviation Industry Fund, the person with knowledge of the situation said. New China Trust is 20% owned by Barclays PLC.

ICBC is an established player in aircraft finance, and Bank of China also has a fast-growing Singapore-based aircraft leasing business.

The AIG talks were previously reported by Bloomberg News, which said ILFC's management would participate in the transaction as well. A deal isn't imminent, the person with knowledge of the situation said.

AIG executives repeatedly have said they are waiting for market condition to improve before they go ahead with plans to sell more than 50% of ILFC in a public offering.

Previous efforts to sell ILFC to a consortium led by its previous management team foundered on price, with AIG at the time seeking more than $7 billion, according to people familiar with the situation at the time.

ILFC has taken more than $3 billion in asset impairments over the past two years but rebuilt its balance sheet and secured access to funding markets again after the near-collapse of AIG left it strapped for liquidity.

The firm is also operating in an industry that has prospered as airlines increasingly rent their plans instead of buy them.

ILFC owns and manages almost 1,000 jets, and any sale of ILFC would be the latest in a string of deals by investors keen to secure long-lived assets such as commercial aircraft.