NEW YORK (Reuters) - American International Group’s (AIG.N) aircraft leasing unit may need additional financing from its cash-strapped parent or a third party to meet its obligations.
International Lease Finance Corp, or ILFC, disclosed details of its financing needs in its annual report filed with the U.S. Securities and Exchange Commission on Wednesday.
ILFC, one of the world’s largest aircraft leasing companies, is one of the units AIG has put on the auction block. Private equity firms are eyeing the firm, and a buyer could get financing help from AIG under revisions to AIG’s U.S. financial rescue earlier this month.
AIG has undertaken asset sales to raise funds to pay back part of its debt to the U.S. government, which has extended up to $180 billion after the giant insurer’s bets on the U.S. housing market left it on the verge of bankruptcy.
“Without additional support from AIG or obtaining secured financing from a third party lender, in the future there could exist doubt concerning our ability to continue as a going concern,” ILFC said in the regulatory filing.
The AIG division said it was seeking secured financing to fund contractual obligations through the end of April. It said AIG has approved an additional $900 million loan to be provided by AIG Funding at the end of this month, subject to New York Federal Reserve consent.
ILFC lost access to a federal commercial paper lending facility after key credit ratings were cut in January, according to the filing.
The New York Fed extended AIG an $85 million loan last September and, along with the U.S. Treasury, has increased financial support of the insurer in the months since.
Investors skittish about ILFC default risk pushed up the cost to insure ILFC debt on Wednesday. The cost of insuring $10 million of debt for five years was $500,000 per year plus an upfront payment of $3.35 million, according to Markit Intraday. On Tuesday the upfront payment was $2.7 million.
Reporting by Lilla Zuill; additional reporting by Karen Brettell; editing by John Wallace