AIG Revives Plane Unit IPO After Continued Delay in China Sale

By Zachary Tracer, Bloomberg | June 24, 2013

American International Group Inc. revived plans for an initial public offering of its plane- leasing unit after the insurer extended a deadline for a group of Chinese investors to buy the business.

International Lease Finance Corp., the plane business owned by AIG, updated the registration statement last week for a potential IPO. The New York-based insurer had shelved the IPO plan last year after striking a deal to sell 80 percent of ILFC to a group led by New China Trust Co. Chairman Weng Xianding for about $4.2 billion.

“If AIG Capital completes the sale of ILFC’s common stock to the purchaser, we will not proceed with the offering” of ILFC shares, according to the filing.

AIG granted a second extension to the buyer group this week, saying it has until July 31 to complete a deal. The deadline had been pushed back to June 14 from May 15. As part of the extension, the insurer has the right to pursue other offers or prepare for an IPO.

“The probability of a termination is rising, as the deal’s approvals and closing continue to be delayed,” Josh Stirling, an analyst at Sanford C. Bernstein & Co., wrote in a research note this week. “AIG does have other options for ILFC.”

Citigroup Inc., JPMorgan Chase & Co. and Morgan Stanley were selected to lead an ILFC offering, according to the filing. Steven Lipin, who represents the buyers at Brunswick Group, declined to comment, as did AIG’s Matt Gallagher.

The filing updates ILFC’s financial results through the end of March. The previous IPO filing was on Nov. 28 and included results from the third quarter of 2012.

Revenue Decline

Revenue from leasing aircraft fell 9.7 percent in the first quarter of 2013 from a year earlier, ILFC said in the filing, contributing to a drop in net income to $49.6 million from $99 million.

“Recent challenges in the global economy, including uncertainties related to the Euro zone, with the most recent economic crisis in Cyprus, political uncertainty in the Middle East, and sustained higher fuel prices, have negatively impacted many airlines’ profitability,” ILFC said in the filing.

AIG Chief Executive Officer Robert Benmosche has said he wants to sell the plane-leasing unit as AIG seeks to lower risk and simplify its business. To pursue an IPO, the insurer would have to be “pretty confident” it could sell more than 51 percent of the business, he said at an investor conference on June 4.

AIG divested more than $60 billion in assets to repay a U.S. bailout that began in 2008. Benmosche, who took over in 2009, repaid the government last year. He is focusing on U.S. life insurance and global property-casualty after selling Asia life units and a consumer lender.

Debt Reduction

Benmosche said selling ILFC is part of the insurer’s plan to reduce debt, which he considers essential before resuming share repurchases. The unit had about $24.1 billion in borrowing as of March 31, according to the filing.

AIG acquired ILFC in 1990 for $1.16 billion from founder Steven Udvar-Hazy, data compiled by Bloomberg show. Under AIG’s ownership, the unit had been able to borrow money at lower rates, an advantage that evaporated when the insurer was hobbled by losses tied to subprime mortgages.

With assistance from Lee Spears and Noah Buhayar in New York. Editors: Dan Kraut, Dan Reichl

 

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