June 5 AIG's sale of its airplane-leasing
business to a Chinese consortium overcame a key financing
stumble and has likely cleared a major U.S. regulatory hurdle as
well, but questions about the deal's future persist.
The Chinese consortium buying International Lease Finance
Corp (ILFC) placed about 10 percent of the purchase price in an
escrow account, American International Group said in a
regulatory filing on Wednesday. A delay in the payment had
threatened to derail the deal.
The deposit also indicated that the U.S. government's
Committee on Foreign Investment in the United States (CFIUS) had
decided that the deal posed no threat to national security,
according to a source familiar with the situation and a review
of the contract between AIG and the buyers.
The ILFC buying consortium includes New China Trust,
one-fifth owned by Barclays Plc ; China Aviation
Industrial Fund, and P3 Investments Ltd.
An approval from CFIUS, a secretive body made up of several
government agencies and headed by the U.S. Treasury secretary,
would be a major milestone for the $4.8 billion deal. It would
also come ahead of a summit later this week between U.S.
President Barack Obama and his Chinese counterpart, Xi Jinping.
National security concerns and political backlash against
deals involving Chinese buyers have for years hindered
dealmaking between companies in the world's two largest
economies. CFIUS, whose reviews are notorious for lack of
transparency, has added to the uncertainty by leaving dealmakers
with little guidance on what would raise alarms in Washington.
AIG, the Treasury Department and a spokesman for the
consortium were not immediately available to comment.
The deal still needs approvals from other regulators, and
AIG's contract with the consortium is set to expire on June 14.
The insurer has not yet decided whether it would extend it or
look for other options for ILFC, a source familiar with the
Other options before AIG could include an initial public
offering. AIG filed to take the business public in 2011 before
ultimately agreeing on the sale last year.
AIG has done that before, notably when it took Asian
insurance business AIA public after a $35.5 billion
deal to sell it to Britain's Prudential Plc fell apart.
With nearly 1,000 owned or managed planes, ILFC is one of
the world's largest players in the business of buying aircraft
and leasing them to airlines.
AIG announced the deal to sell ILFC last December
. Two weeks ago, the two sides agreed to extend
the deadline for the deal's closing by a month, to mid-June
But last week, AIG said the consortium had failed to wire
the money for the initial deposit on the deal, raising questions
about whether it would go ahead.
The source attributed the delay in the escrow deposit to
complexities arising from dealing with banks in China and the
involvement of several parties and regulators in the
ILFC was the last major asset that AIG was attempting to
dispose of following its government-backed restructuring. It has
recorded heavy charges in recent years to write down the value
of older planes in its fleet. The sale price for ILFC was about
half of what AIG once said the business was worth.
AIG shares closed down 20 cents at $43.90 on Wednesday.