(Corrects Dec 7 story to delete incorrect reference in last
paragraph to Goldman being among AIG's advisers)
* Chinese consortium to bid $5.5 bln for most of ILFC
* Consortium includes Chinese bank ICBC
* Deal announcement expected as early as next week
By Alison Leung and Ben Berkowitz
HONG KONG/NEW YORK, Dec 7 A group of Chinese
companies, including Industrial and Commercial Bank of China
(ICBC), is in talks to buy nearly all of American International
Group Inc's aircraft leasing unit for about $5.5
billion, AIG said on Friday.
The deal is expected to be announced as soon as early next
week, a source familiar with the matter said on condition of
AIG, which has been selling assets to pay back a $182
billion U.S. government bailout from 2008, had long been hoping
to float its ILFC aircraft leasing unit through an initial
public offering, but poor market conditions forced it to delay
An IPO was expected to value the company at $6 billion to $8
billion, according to previous reports on the plans.
AIG Chief Executive Robert Benmosche said last month that he
was waiting for markets to improve to take ILFC public.
AIG said it is in talks to sell a 90 percent stake in the
unit to a consortium including trust company New China Trust Co
Ltd, China Aviation Industrial Fund, and an investment arm of
ICBC , China's largest bank. New China
Trust is 20 percent-owned by British bank Barclays Plc.
"The talks are reasonably far along," a second source said.
An ILFC spokesman declined comment.
A spokesman for ICBC declined to comment. Reuters was unable
to reach New China Trust and China Aviation.
Shares in AIG rose 2.6 percent to $34.13 on the New York
Stock Exchange, after touching their highest level in more than
five weeks earlier in the day.
"We view this news positively, since we think a sale of ILFC
is the last large transaction AIG needs to do as it continues
its turnaround," S&P Capital IQ analyst Cathy Seifert said in a
The capital may come at a good time for AIG. Late Friday, it
said it expects after-tax losses of at least $1.3 billion from
Superstorm Sandy. It said it would contribute $1 billion to its
U.S. property insurance units to help cover the losses.
According to AIG's third-quarter earnings report, ILFC's net
book value as of Sept. 30 was $7.9 billion. In the past,
Benmosche had been adamant about not selling ILFC for less than
book value, although the fact that the IPO process has
languished for 15 months may have changed his thinking.
ILFC reported total assets of $39.6 billion and $39 million
in operating income in the third quarter, compared with an
operating loss of $1.3 billion a year earlier, when it took $1.5
billion of impairment charges and fair value adjustments.
Founded by aircraft leasing legend Steven Udvar-Hazy, who
sold the company to AIG and eventually formed his own group,
ILFC is one of the world's largest leasing companies and among
the world's biggest owners of passenger jets. Its main rival is
GECAS, an arm of General Electric Co.
ILFC's customers include most of the world's major airlines.
Since it was founded almost 40 years ago, ILFC has bought a
combined total of more than 1,500 passenger jets from Boeing Co
and Airbus, according to manufacturer figures.
ILFC has a portfolio of more than 1,000 owned or managed
aircraft. It has on order 239 new fuel-efficient planes,
including Boeing 787s and Airbus A320neos, and has the rights to
purchase an additional 50 such aircraft.
The leasing company has been looking for areas of growth and
beefed up its presence in the Asia Pacific region by opening
offices in Singapore and Beijing this year.
CHINESE BUYING SPREE
China has shown interest in buying aircraft leasing
China Development Bank, the country's policy lender, was
among the short-listed bidders for Royal Bank of Scotland Group
Plc's aviation business earlier this year, according to
a previous Reuters report.
That business was bought by a consortium led by Japan's
Sumitomo Mitsui Financial Group.
Analysts say China tends to balance its orders between
Airbus and Boeing, the world's two dominant aircraft
manufacturers, partly for political reasons.
As a result, the manufacturers may not need to compete as
heavily for orders as in the rest of the world, so China is
paying a premium for aircraft, industry experts say. The order
books of ILFC could mean cheaper planes for China.
Chinese companies have launched about $51.3 billion worth of
overseas acquisitions this year, making the country Asia's
second-biggest spender on outbound transactions, according to
Thomson Reuters data, behind Japan.
Credit Suisse is among the banks advising the buyers.
(Additional reporting by Denny Thomas, Michael Flaherty, Vikram
Subhedar, Kelvin Soh, and Elzio Barreto in Hong Kong, Tim Hepher
in Paris and Ben Berkowitz in New York; Editing by Mark Potter,
Lisa Von Ahn, John Wallace, Tim Dobbyn and Leslie Adler)