AIG's US$4.2b sale of plane-leaser ILFC to Chinese investors in doubt

Mainland investors yet to pay deposit for the US$4.2 billion stake in aircraft lessor

PUBLISHED : Thursday, 06 June, 2013, 12:00am
UPDATED : Thursday, 06 June, 2013, 4:53am

American International Group chief executive Robert Benmosche raised doubt about whether the company would complete a sale of its plane-leasing unit to a Chinese investor group by a deadline this month.

"June 14, we have to make a decision," Benmosche said on Tuesday. "Whether this deal will get done or not, we don't know."

AIG said last week that it had not received a deposit required in an agreement to sell International Lease Finance Corp to acquirers led by New China Trust's chairman, Weng Xianding. That would allow AIG to cancel the accord, reached in December last year, to sell 80 per cent of ILFC for about US$4.2 billion.

The transaction is subject to approval from US and Chinese regulators, including the Committee on Foreign Investment in the US.

Benmosche said AIG had the option of cutting its stake in ILFC through a public offering if the deal fell apart.

"Common sense would tell you that we would continue our dialogue" with the potential buyers, he said. There were "a lot of hurdles to go through. It's very complicated, and we're doing the best we can".

A spokesman for the Chinese buyers declined to comment.

The Chinese consortium was actively pushing forward the progress of the deal, China Business News reported on its website, citing New China Trust's Weng as saying.

Weng did not directly respond to questions about the issue of the deposit payment, the newspaper reported.

Two telephone calls to New China Trust's office were not answered yesterday.

Investors have been counting on AIG to sell the unit so it can speed buy-backs and pay a dividend, according to analysts.

Benmosche said the transaction was meant to reduce risk and narrow AIG's focus.

Maurice Greenberg, the former chief executive of AIG, bought ILFC in 1990 to diversify earnings.

The company made money by capitalising on the spread between AIG's borrowing costs and the rates paid by airlines for leasing jets.

AIG has sold assets to repay a 2008 US government bailout that swelled to US$182.3 billion. The government exited its stake last year at a profit.

"The ILFC transaction is not about raising cash to buy back shares," Benmosche said. "This is about simplifying AIG, having a company that is manageable, in my opinion, and is around insurance, and not how to begin to get extra yield on some of the investments we could make as a company leveraging what used to be the triple-A of AIG."

ILFC owns or operates a fleet of about 1,000 aircraft.


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