AIG to sell aircraft leasing business to AerCap in $5.4-bn deal

16 Dec 2013

US insurer American International Group Inc (AIG) today announced plans to sell its aircraft-leasing business to AerCap Holdings NV in a deal valued at about $5.4 billion.

AIG said it has entered into a deal with AerCap to sell its 100-per cent stake in International Lease Finance Corp (ILFC) for $3 billion in cash and 97.56 million  (97,560,976) newly issued AerCap common shares.

The transaction, which has a value of approximately $5.4 billion, based on AerCap's closing price per share of $24.93 on 13 December 2013, is expected to close in the second quarter of 2014.

The transaction also marks the last major disposition of AIG's non-core assets.

Prior to entering into the agreement with AerCap, AIG said, it terminated the share purchase agreement with Jumbo Acquisition Limited for the sale of up to 90 per cent of the common stock of ILFC.

''This transaction creates a strong foundation for ILFC and positions it for continued market leadership and strategic growth,'' said Robert H Benmosche, president and chief executive of AIG.

Benmosche said, ''ILFC is a valuable business, and AIG has always taken great pride in ILFC's reputation for innovation, its pioneering role in aircraft leasing, its industry-leading team of employees, and its consistent and successful market leadership. The combination of AerCap's young fleet of in-demand aircraft and proven portfolio management capabilities with ILFC's attractive order book and broad marketing reach will continue to lead the industry.

''However, as we have said all along, 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,'' it added.

The transaction is subject to required regulatory approvals, including all applicable US and foreign regulatory reviews and approvals, and approval of AerCap's shareholders, as well as other customary closing conditions.

Waha Capital, AerCap's largest shareholder with a current stake of 26 per cent, has agreed to vote in favour of the transaction.

AIG will receive net cash proceeds of approximately $2.4 billion after the settlement of inter-company loans, which it proposes to utilise for general corporate purposes.

AIG said it would continue to present ILFC as a ''held for sale'' asset prior to closing, but will now include ILFC's operating results in continuing operations given the interest in AerCap to be acquired by AIG upon the closing of the transaction.

Post-closing, AIG expects to recognise income from its investment in AerCap under the equity method of accounting.

In connection with its ownership of approximately 46 per cent of AerCap common shares following the closing of the transaction,

AIG has agreed to enter into a stockholders agreement and a registration rights agreement with AerCap in connection with the nearly 46 per cent it would hold in the company following the closing of the transaction.

AIG will be allowed to encash the stock after a lock-up period and will have the right to nominate two members of the AerCap board.

AIG has also agreed to provide a $1 billion, five-year unsecured revolving credit facility to the combined company, to be available as of the closing of the sale of ILFC.

''AerCap's acquisition of ILFC will create the leading global franchise in the aircraft leasing industry. This transaction presents a unique strategic opportunity to bring together the outstanding and experienced personnel from both companies and two attractive portfolios of modern aircraft on lease to a highly diversified customer base,'' Aengus Kelly, chief executive of AerCap, said.

''We believe AerCap will now have the most attractive order book in the industry. With these combined resources, along with a strong liquidity profile, we will drive high levels of stable long-term profitability and cash flows for the benefit of all our stakeholders,'' he added.

''I am proud of the hard work and leadership demonstrated by the ILFC team over the last four years. Raising the organisation to an investment-grade-rated company with a best-in-class order book and a solid balance sheet was a formidable journey that brought us to this promising combination with AerCap. Becoming the number one lessor in the world is a just reward for all this work,'' Henri Courpron, CEO of ILFC, said.

AerCap is one of the world's leading aircraft leasing companies and has one of the youngest fleets in the industry.

Based in the Netherlands, AerCap with offices in Ireland, the United States, China, Singapore and the United Arab Emirates.

International Lease Finance Corporation is a global market leader in the leasing and remarketing of commercial aircraft. With nearly 1,000 owned and managed aircraft and commitments to purchase approximately 330 new high-demand, fuel-efficient aircraft, ILFC is the world's largest independent aircraft lessor.

ILFC has approximately 200 customers in more than 80 countries and provides part-out and engine leasing services through its subsidiary, AeroTurbine.

ILFC operates from offices in Los Angeles, Amsterdam, Beijing, Dublin, Miami, Seattle, and Singapore.