Posted on 14 Apr 2010
American International Group Inc.'s (AIG) aircraft leasing division has sold 53 aircraft to Macquarie Group Ltd. for $1.99 billion, the companies said Wednesday, as the Australian investment bank continues to ramp up its leasing businesses.
One of the world's largest airplane lessors, AIG unit International Lease Finance Corp. last month said it was seeking to raise up to $3.5.5 billion from asset sales. It has $6.8 billion in debt due this year that is being serviced with AIG loans effectively backstopped by the New York Federal Reserve and secured by aircraft.
ILFC remained profitable in the downturn but AIG remains heavily dependent on government aid. AIG originally considered selling the unit to reduce its debt and raise capital but later decided to offload parts of its fleet in deals like the one announced Wednesday.
Alan Lund, the unit's new CEO, said Wednesday that ILFC's ability to garner large aircraft sales along with its success in tapping financial markets "strongly demonstrates ILFC's ability to generate liquidity and delever its balance sheet."
Macquarie's purchase of the portfolio for below its $2.32 billion book value follows the investment bank's purchase of a 1 billion Australian dollar ($927.4 million ) portfolio of auto leases and loans from the Australian arm of auto giant Ford Motor Co. in October.
"This transaction leverages Macquarie's existing expertise in asset leasing, demonstrates the strength of our aircraft management capabilities and diversifies the client base of our aircraft fleet," said Macquarie Group Chief Financial Officer Greg Ward in a statement.
Of the 53 aircraft in the AIG portfolio, Macquarie Group said it will retain 47 and transfer to its 37.5%-owned Macquarie AirFinance Ltd. the right to purchase the remaining six from AIG on similar terms. Macquarie AirFinance is a global aircraft leasing company that in 2006 purchased GATX Air. Prior to the deal with AIG, Macquarie AirFinance owned or managed 124 jet aircraft leased to 57 operators in 30 countries.
Macquarie Group leases assets through its Corporate and Asset Finance Division, which had loans and leases under management of A$13.8 billion as at Dec. 31. Its existing aircraft leasing business also includes its wholly-owned aircraft leasing unit Macquarie Asset Leasing Trust, which owns nine aircraft on lease to Australia's biggest airline Qantas Airways Ltd.
Macquarie Group said the 47 aircraft it intends to retain are young, modern aircraft on lease to 35 airlines in 27 countries. The weighted average life of the fleet is less than four years and the average remaining lease term is more than five years. Boeing 737 Next Generation and Airbus A320 Family aircraft make up more than 70% of the portfolio.
The sale will increase the average age of ILFC's remaining fleet to 7.6 years from 7.4.
ILFC recently lost its interim chief executive, less than two months after he assumed the post, because of federal compensation limits. AIG Chief Executive Robert Benmosche has said the unit's ability to sell $750 million in bonds last month reflects investor confidence in the group.
The deal is expected to be completed by the end of 2010. Macquarie said the impact of the deal on its regulatory capital surplus isn't expected to be material.