AIG aircraft unit’s loan sales garner demand; to provide add’l funding ahead of possible sale

AIG aircraft unit debt offering has strength

CHARLOTTE, N.C. — International Lease Finance Corp., the aircraft-leasing unit of American International Group Inc., is looking to raise $1.3 billion in loan offerings as it seeks new funds to help repay some of its debt.

The loan sales mark ILFC’s first attempt at raising money since AIG received a federal bailout package originally worth up to $182.5 billion in the fall of 2008. ILFC previously took $3.9 billion from AIG to pay back some of its debt.

ILFC announced plans for a $750 million debt raise, secured by some of its aircraft and leases, on Feb. 22.

The unit is now looking to borrow $1.3 billion by selling a $750 million five-year term loan and a $550 million six-year term loan, AIG spokesman Mark Herr said.

The sales are expected to close by month’s end.

Such a move is a good sign for both ILFC and AIG, analysts said.

Investors were “so sensitive on the down side, they have to recognize the external environment is improving,” said Bill Bergman, an analyst at Morningstar.

A recovery in the credit markets over the past year and a half has made it possible for even bailed-out companies like AIG to tap investors for fresh funds.

Century City, Calif.-based ILFC leases its commercial jets, one of the world’s largest fleets, to airlines. As of Dec. 31, the company owned 993 jet aircraft. ILFC was thought to be one of the New York-based insurer’s jewels. But like many of AIG’s business units, it has been up for sale as the insurer struggles to pay back its debt to the U.S. government.

Aite Group senior analyst Clark Troy said ILFC is not a core asset for AIG going forward.

“(CEO Robert) Benmosche is an insurance guy,” Troy said. “Plane leasing is not an insurance line of business.”

In the last two weeks, AIG has announced two big asset sales that will bring in nearly $51 billion to help pay its debt to the government. As of Dec. 31, AIG owed the Treasury and the Federal Reserve Bank of New York nearly $130 billion.

Last month, when AIG announced an $8.87 billion fourth-quarter loss, CEO Robert Benmosche said his company was continuing to address funding needs and explore options for restructuring ILFC.

In a recent regulatory filing by IFLC, the company said AIG has plans to support ILFC through Feb. 28, 2011, “to the extent that secured financing, aircraft sales and other sources of funds are not sufficient to meet liquidity needs.”

AIG shares gained $2.66, or 8 percent, to $35.43 in afternoon trading.