AIG seen pursuing IPO for jet lessor ILFC as China deal stalls

Move follows stalling of Chinese investors' purchase of leasing business for planes

PUBLISHED : Friday, 02 August, 2013, 12:00am
UPDATED : Friday, 02 August, 2013, 5:18am

American International Group is increasingly likely to pursue an initial public offering for its plane-leasing business after a deal with Chinese investors stalled, according to analysts who follow the insurer.

"The fallback is a public offering," said Charles Sebaski, an analyst at BMO Capital Markets. "I don't think there's a likely other acquirer out there for this asset."

A Chinese buyer group had a deadline of Wednesday to complete the US$4.2 billion purchase of at least 80 per cent of AIG's International Lease Finance Corp, and the insurer had not received the funds, according to a person with knowledge of the matter. Discussions were continuing and the deadline might be extended, said the person, who asked not to be identified because the talks were private.

AIG chief executive Robert Benmosche, who repaid a US bailout last year, has been seeking to get rid of ILFC to reduce debt and simplify the company. Proceeds from the disposal could help the insurer reinstate a dividend or buy back shares.

The insurer updated the registration statement for an initial public offering of Los Angeles-based ILFC on June 21, after shelving the IPO plan when it announced the deal with Chinese buyers in December. The deadline was pushed back to Wednesday after being extended to June 14 from May 15.

The group that agreed to buy the unit is led by New China Trust chairman Weng Xianding and includes China Aviation Industrial Fund and P3 Investments. A spokesman for the investors declined to comment as did AIG's Matt Gallagher, and ILFC's Paul Thibeau.

ILFC was probably worth about US$5 billion, based on the valuations and recent stock performance of peers, Gary Liebowitz, an analyst at Wells Fargo, said. That is "pretty close" to the valuation of the Chinese buyers, which was about US$5.3 billion, he said. "It is a viable Plan B," Liebowitz said of an IPO.

Much of ILFC's attraction was its backlog of new planes that were more fuel-efficient and sought by airlines, such as the Airbus SAS A320neo and Boeing 787 Dreamliner, he said.

"AIG made it pretty clear that if they didn't get the money or the deal couldn't be completed that they would potentially go and do an IPO or look for other buyers," said Gloria Vogel, an analyst at Drexel Hamilton.