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Chinese Consortium Buys AIG's Aircraft Leasing Arm

by Mary Swire, Tax-News.com, Hong Kong

14 December 2012


American International Group (AIG) has announced that it has agreed with a group of investors led by Weng Xianding, the Chairman of New China Trust, to sell up to a 90% stake in its aircraft leasing company, International Lease Finance Corporation (ILFC).

The investor group comprising New China Trust Co. Ltd., China Aviation Industrial Fund and P3 Investments has agreed to acquire 80.1% of ILFC for approximately USD4.23bn, with an option to acquire an additional 9.9% stake. Upon receipt of required Chinese regulatory approvals and exercise of the option, the investor group is expected to be expanded to include New China Life Insurance Co. Ltd. and an investment arm of ICBC International.

ILFC is a leading independent aircraft lessor with a global customer base of approximately 200 airlines in 80 countries. ILFC’s portfolio consists of over 1,000 owned or managed aircraft, as well as commitments to purchase 229 new high-demand, fuel-efficient aircraft and rights to purchase an additional 50 such aircraft.

The transaction, which is expected to close in the second quarter of 2013, will leave AIG with at least a 10% ownership stake in ILFC, allowing it to continue to participate in the company's growth.

"This transaction creates a solid and strategic partnership for ILFC," said Robert H. Benmosche, President and Chief Executive Officer of AIG. "While ILFC is an extremely strong business platform and AIG will retain a minority stake as a passive investor, the aircraft leasing business is not core to our insurance operations. Upon completion, the transaction will have a positive impact on AIG’s liquidity and credit profile and will enable us to continue to focus on our core insurance businesses."

Weng Xianding, Chairman of New China Trust Co. Ltd added: “Our group shares a commitment to ILFC’s experienced management team, its operating philosophy, and its presence in the United States. This transaction allows ILFC to continue to serve its worldwide partners in the aviation industry with world-class service while accelerating its growth in important markets, including Asia."

“This is an exciting new chapter for ILFC that will position the company for robust future growth,” AIG Executive Henri Courpron commented. “With existing management remaining in place, the transition will be seamless, allowing ILFC to maintain its focus on delivering the best mix of modern aircraft to meet our customers’ needs around the world. In addition to a large aircraft delivery pipeline, ILFC has a dedicated management team with extensive airline, manufacturer, and leasing experience. We look forward to working with the investor group to explore new opportunities for our business. Last year, ILFC opened new offices in Beijing and Singapore dedicated to regional customer support as the region’s aviation growth and demand is well established and expected to increase significantly."

The deal follows two other recent high-profile deals involving Asian buyers, the largest of which involved the purchase of RBC Aviation Capital for USD7.3bn by the Sumitomo Group - a record transaction for the sector. In addition, Mitsubishi acquired Oaktree Capital Management aircraft leasing operations for USD1.3bn earlier this year.

TAGS: aviation

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