Reports: AIG Nears $5 Bln Deal To Sell Aircraft Leasing Unit ILFC To AerCap

(RTTNews) - Insurer American International Group, Inc. (AIG) nearing a deal to sell aircraft leasing unit International Lease Finance Corp. or ILFC, to Dutch aircraft lessor AerCap Holdings NV (AER) for around $5 billion, according to media reports on Thursday. The deal is expected to be announced as early as next week.

The move reportedly comes after AIG was unable to close the proposed sale of the majority stake in ILFC to a consortium of Chinese investors. AerCap is reportedly looking to team up with other bidders for the deal.

AIG agreed exactly a year ago to sell a 90 percent stake ILFC to an investor group led by Weng Xianding, the Chairman of New China Trust Co. Ltd. for about $4.75 billion in two tranches. The deal valued the whole of ILFC at about $5.28 billion, and was expected to close in the second quarter of 2013. The investor group also included China Aviation Industrial Fund and P3 Investments Ltd. New China Trust is one-fifth owned by Barclays Plc (BARC.L, BCS).

Then in June 2013, AIG filed updated initial public offering documents after an extension of a deadline for the group of Chinese investors to get regulatory approvals to acquire the unit till July 31.

According to revised terms with the Chinese investors, AIG was free to seek other buyers and proceed with preparations for a potential IPO for ILFC.

AIG put ILFC on the block since late 2008 as part of its strategy to divest non-core assets to focus on its core insurance businesses and help it repay the huge $182.3 billion bailout it received during the financial crisis in September 2008.

After trying unsuccessfully to sell ILFC for four years, AIG was looking to spin out the unit through an IPO, but got delayed as market conditions were found to be unfavorable. That is when the deal with the Chinese consortium was struck in December 2012. However, AIG has not formally terminated its deal with the Chinese consortium.

Los-Angeles-based ILFC is the last major unit slated for sale by AIG after selling more than $70 billion in non-core assets. ILFC was unable to attract a buyer as it has recorded big write-downs in recent years on the value of the older planes in its fleet.

ILFC ranks just behind General Electric Co.'s (GE) GE Capital Aviation Services as the world's second largest lessor with an owned and managed fleet of about 1,000 planes. GECAS has a fleet of 1,700 planes. ILFC generated revenues of $4.5 billion in 2012 and has about 200 airline partners in more than 80 countries.

Meanwhile, ILFC was unable to attract a buyer as it has recorded big write-downs in recent years on the value of the older planes in its fleet.

AIG closed Thursday's regular trading session at $49.42, up $0.72 or 1.48% on a volume of 14.57 million shares, and AER closed at $23.91, up $2.49 or 11.62% on a volume of 3.58 million shares.