Oaktree may sell Pegasus Aviation unit

Oaktree Capital Management, a Los Angeles buyout firm, plans to sell its aircraft-leasing unit to take advantage of record orders for commercial planes, three people familiar with the decision said.

Pegasus Aviation Finance Co., which is about 90% owned by Oaktree, may fetch as much as $1.5 billion including debt, said the people, who asked not to be identified because the talks are private. Oaktree hired Merrill Lynch & Co. to help with the sale, and one person said 20 potential buyers had expressed interest.

Pegasus has a fleet of 250 planes, leased to companies including UAL Corp.’s United Airlines and AMR Corp.’s American Airlines.

Orders are soaring from carriers aiming to expand and replace aging planes quickly and with less of their own money. Limited production capacity at Boeing Co. and Airbus has also spurred requests for leases.

Founded in 1988, Pegasus has built its fleet in part by striking agreements with Chicago-based Boeing and Airbus of Toulouse, France, to take ownership of aircraft ordered by airlines that are unable to take delivery. Those planes are then leased to the carriers that placed the original order.

The people said Merrill began soliciting potential buyers about two weeks ago for San Francisco-based Pegasus. The companies that have expressed interest include Bank of China Ltd., private equity investors and other aircraft lessors, the people said.

Scott Weiss, a spokesman for Pegasus, declined to comment.