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Allied Aviation Offered to Buy All of AIG's ILFC Plane Unit

Source: WSJ

Posted on 07 Dec 2009

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A little-known U.S. aviation firm said Monday it had offered $12 billion to acquire the aircraft leasing unit of American International Group Inc. (AIG).

But Allied Aviation Inc., best known for providing fuel services to airlines, said it has been "stonewalled" in the prolonged effort to sell International Lease Finance Corp., the world's largest aircraft leasing company by fleet value.

Mike Kiouses, a spokesman for Allied, said the company had proposed buying ILFC's 1,000-plus aircraft portfolio in its entirety, though declined to detail its funding plans.

Allied's role was earlier reported by Reuters.

AIG shelved the proposed sale to two private equity firms earlier this year after failing to reach agreement on a deal valued at under $5 billion, according to people familiar with the situation.

The financial services group has since revived the sale process after receiving an offer from ILFC co-founder and Chief Executive Steve Udvar-Hazy to buy about 10% of the business, according to these people.

Allied said its proposed offer hinged on U.S. government support while it restructures ILFC's reliance on short-term funding.

ILFC has been forced to rely on backing from its parent, backstopped by the U.S. government which now controls AIG, after being frozen out of the short-term funding market.

Allied was not shortlisted as a potential buyer by AIG earlier this year. "Initially, nobody wanted to talk to us because we didn't have the money," said Kiouses.

In the wake of Hazy's proposal, AIG has since revived the sale process with a "shadow" portfolio of aircraft that mirrors that targeted by the ILFC chief, according to people familiar with the process. Bids from private equity firms that have already expressed interest in the process have since been lodged, according to a person familiar with the process.

Credit Suisse Group (CS) is looking to raise about $2 billion in debt finance for the proposed purchase of part of ILFC's portfolio, though this is not tied to any one proposal.

Hazy revived plans to acquire part of the business he co-founded with backing from Greenbriar Equity Group LLC, Onex Partners and Canada Pension Plan, who have been in exclusive sale talks with AIG.