Aircraft leasing firm ILFC plans for IPO, spinoff from AIG
Aircraft leasing giant International Lease Finance Corp. has unveiled plans for an initial public offering, taking the first steps to spin off from parent company American International Group Inc.
In a filing with the Securities and Exchange Commission late Thursday, the Century City company, commonly known as ILFC, said that “AIG has determined that ILFC is not one of its core businesses.”
The filing may mark the beginning of the end for AIG’s 21-year ownership of ILFC, one of the world’s biggest aircraft leasing companies. It buys planes and rents them to airlines.
The subsidiary has struggled since AIG’s near collapse in 2008 left the parent company under government control.
The New York insurance giant received $182.5 billion in bailout money during the global financial crisis and has recently been selling off business units in an attempt to pay back the federal government. AIG has hinted at selling ILFC for the past few years but has been unable to close a deal.
“It seems that AIG believes that issuing an IPO is better than selling ILFC to another company outright,” said Philip Baggaley, an analyst at Standard & Poor’s in New York who specializes in airlines and aircraft leasing companies.
According to the filing, AIG initially plans to sell a 20% stake in ILFC and divest most of the unit over time. The filing did not disclose how many shares would be sold or estimate their price, nor did it say when the stock sale would take place.
“It has been a long and difficult detour for ILFC because of AIG’s problems and the financial market in general,” Baggaley said. “The company seems to be back on track.”
AIG bought ILFC in 1990 for $1.3 billion in a stock swap. The sale was beneficial for ILFC because it was able to leverage AIG’s then-stellar credit ratings to access billions of dollars in short-term, lower interest debt to buy planes.
But those benefits changed with AIG’s financial collapse, and ILFC has struggled to borrow money. That forced AIG to tap financing from the Federal Reserve Bank of New York in an arrangement set up during AIG’s bailout.
The bailout also placed restrictions on executive compensation, which caused a mass exodus of ILFC’s management team. The biggest blow came in February 2010 when company co-founder and then-Chief Executive Steven Udvar-Hazy abruptly left to start a rival business, Air Lease Corp., also based in Century City.
His new company went public in the spring but its stock has plummeted in recent weeks. It closed at $21.96 on Friday, down 21% from its opening price of $27.95 in April.
ILFC, however, remains one of the world’s largest aircraft leasing firms with a fleet of 933 aircraft. The company posted $2.2 billion in revenue in the six-month period ended June 30.
It has a new management team that includes Henri Courpron, a former Airbus executive, as chief executive.
AIG warned the initial public offering is not certain. The company said it is exploring “strategic alternatives for monetizing its interest in ILFC, which may include an IPO.”
