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UPDATE 2-AIG finally gets advance for sale of aircraft-leasing unit
June 5, 2013 / 2:30 PM / 4 years ago

UPDATE 2-AIG finally gets advance for sale of aircraft-leasing unit

June 5 (Reuters) - 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.

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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 situation said.

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 cross-border transaction.

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.

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