AIG weighs options as it pushes on ILFC sale: source

NEW YORK Wed Jun 3, 2009 11:10pm EDT

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NEW YORK (Reuters) - American International Group Inc (AIG.N) is in talks to line up financing to facilitate the sale of its aircraft leasing unit, but it will consider options such as selling some aircraft if it fails to do so, a person familiar with the matter said on Wednesday.

AIG is negotiating with three bidding groups for International Lease Finance Corp (ILFC) and is hopeful of a deal, but a sale is complex as the parties try to deal with the unit's mountain of debt and funding needs, the source said.

The bidding groups include private equity firms Thomas H. Lee Partners and Carlyle Group CYL.UL; Onex Corp (OCX.TO) and Greenbriar Equity Group; and Terra Firma Capital Partners Ltd TERA.UL, sources have told Reuters.

AIG declined to comment. The source declined to be identified because the sale process is private.

ILFC had total debt financing and subordinated debt of about $32 billion as of March 31, some of which starts to mature in October.

The U.S. Federal Reserve has indicated it could provide about $5 billion in loans but that alone would not cover ILFC's refinancing needs in the next few years, the source said.

Those needs could total $9 billion to $13 billion in the next few years, the Financial Times reported.

Potential buyers are not convinced they will be able to find the extra funds in capital markets and are seeking more money from the Fed, but the government is unlikely to agree, the paper reported.

It added that the insurer was considering whether to break up the company if it cannot reach a deal.

AIG is also in talks with other non-governmental parties including aircraft manufacturers to bridge the gap, the source told Reuters.

If it fails to do so, AIG will look at other options including restructuring the unit, the source said.

ILFC could make its debt structure more manageable if it sold some of its aircraft and it may consider that as a last resort, the source said. As of March 31, ILFC owned 972 aircraft in its leased fleet.

But the source added that AIG is not considering winding down or liquidating ILFC.

The sale is part of a larger divestiture program by AIG, as it looks to pay back the U.S. government after a massive bailout. The government has committed some $180 billion to AIG's rescue, including about $85 billion in loans.

AIG's shares closed down 9 cents at $1.47 on the New York Stock Exchange on Wednesday.

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