AIG Picks Buyer for Aircraft Unit

By | June 8, 2009

American International Group Inc. has picked a group that includes private equity firms Onex Corp and Greenbriar Equity Group as the preferred bidder for its aircraft leasing unit, a source familiar with the situation said Friday.

However, the insurer has not signed an exclusivity agreement with the group for International Lease Finance Corp (ILFC), the source said.

AIG declined to comment. Onex and Greenbriar were not immediately available for comment. The source asked for anonymity because the talks are private.

Onex manages about $10 billion in total, while Greenbriar manages about $1.5 billion and focuses on investments in transportation.

The consortium wants to keep the aircraft leasing business intact, the source added.

The sale of ILFC, which is run by Steven Udvar-Hazy and one of the biggest customers of Boeing Co. and Airbus, has proved to be a challenge due to its mountain of debt and funding needs.

ILFC had total debt financing and subordinated debt of about $32 billion as of March 31, some of which starts to mature in October.

Earlier this week, the source told Reuters that AIG was trying to line up financing to facilitate ILFC’s sale but would consider options that could include selling some aircraft if it failed to do so.

As of March 31, ILFC owned 972 aircraft in its leased fleet.

The U.S. Federal Reserve has indicated it could provide about $5 billion in loans but that alone would not cover ILFC’s refinancing needs in the next few years, the source said earlier.

AIG was also in talks with non-governmental parties including aircraft manufacturers to bridge the gap, the source said earlier.

The planned sale is part of a larger divestiture program by AIG, as it looks to pay back the U.S. government after a massive bailout. The government has committed some $180 billion to AIG’s rescue, including about $85 billion in loans.

Other groups that bid in the second round for ILFC included private equity firms Thomas H. Lee Partners and Carlyle Group , and Terra Firma Capital Partners Ltd, sources have told Reuters.

AIG’s shares closed up 7 cents to $1.71 on the New York Stock Exchange Friday. (Additional reporting by Phil Wahba; Editing by Gerald E. McCormick, Gary Hill)

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