Chinese Firms in Talks to Buy AIG Aircraft Leasing Unit

By Michael Flaherty and Denny Thomas | December 7, 2012

A group of Chinese companies, including the Industrial and Commercial Bank of China (ICBC), is in talks to buy American International Group’s aircraft leasing unit for around $5.5 billion, a source familiar with the matter said on Friday.

AIG, which has been selling assets to pay back a $182 billion U.S. government bailout in 2008, had long been hoping to float its ILFC unit through an initial public offering (IPO), but poor market conditions forced it to delay the plans.

An IPO was expected to value the company at $6 billion to $8 billion, according to previous reports on the plans.

AIG chief executive Robert Benmosche said last month he was waiting for markets to improve to take the company public.

But a Chinese consortium has stepped in to buy the leasing company, said the source, who was not authorised to speak publicly about the matter.

“The talks are reasonably far along,” said the source, adding the purchase price has not been fully determined and depended on various factors.

In addition to ICBC , China’s largest bank, the bidding group includes trust company New China Trust and China Aviation Industry Fund, the source added. New China Trust is 20 percent owned by British bank Barclays.

According to AIG’s third-quarter earnings report, ILFC’s net book value as of Sept. 30 was $7.9 billion.

The filing says ILFC had total assets of $39.6 billion and reported $39 million in operating income in the third quarter, compared to an operating loss of $1.3 billion a year ago when it took $1.5 billion of impairment charges and fair value adjustments.

CHINESE BUYING SPREE

China has shown interest in buying aircraft leasing businesses before.

China Development Bank, the country’s policy lender, was among the shortlisted bidders for Royal Bank of Scotland’s aviation business earlier this year, according to a previous Reuters report. That business was bought by a consortium led by Japan’s Sumitomo Mitsui Financial Group.

Chinese companies have launched about $51.3 billion worth of overseas acquisitions this year, making the country Asia’s second-biggest spender on outbound transactions, according to Thomson Reuters data, behind Japan.

Bloomberg was first to report the news of the Chinese consortium’s plans to buy ILFC.

ILFC has a portfolio of more than 1,000 owned or managed aircraft, and another 239 new fuel-efficient aircraft, including Boeing 787s and Airbus A320neos, on order. It also has the rights to purchase an additional 50 such aircraft.

The leasing company has been looking for areas of growth and beefed up its presence in the Asia Pacific region by opening offices in Singapore and Beijing this year.

An AIG spokesman did not reply to an email seeking comment. An ICBC spokesman declined comment. Reuters was unable to reach New China Trust and China Aviation.

 

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