American International Group Inc.
) is negotiating a deal with Netherlands-based AerCap Holdings NV
for the sale of it aircraft leasing unit - International Lease
Finance Corporation (ILFC) - as reported by the
ILFC is the only major-most asset left for disposition at AIG.
The company has long been attempting to sell off ILFC. In Dec
2012, about 80% of ILFC was vended by AIG in a deal with a
Chinese consortium, comprising New China Trust Co. Ltd., China
Aviation Industrial Fund and P3 Investments Ltd., for
approximately $4.7 billion.
Further, the company granted an opportunity to these investors
to buy another 9.9% in ILFC, taking the total deal value to about
$5.28 billion. Subsequently, AIG would retain the remaining 10%
stake in ILFC.
However, the deal missed three deadlines on May 15, Jun 14 and
Jul 31, due to the delay in attaining regulatory approvals.
Hence, AIG extended the closure of sale to Aug 31, 2013, which
was missed again, as New China Trust reportedly pulled out of the
Although no announcement of official termination has been
made, no assurance on the culmination has appeared till date
Since then, AIG had begun mulling over the bid for an initial
public offering (IPO) of ILFC, an option that was shelved after
the deal was concurred with the Chinese consortium in 2012.
ILFC operates in over 80 countries through a vast fleet of
about 1,000 aircraft worth $34 billion at the end of Sep 2013. It
is also the largest customer for the Dreamliner jets. The firm
also holds deals to procure new high-demand, fuel-efficient
aircrafts as well as rights to buy additional 50 similar
aircraft. However, the company's financials are underperforming
due to decline in revenues from flight equipment rentals, higher
impairments and operating costs.
We believe the sooner the sale or IPO of ILFC takes place the
quicker AIG will be able to release its blocked capital in ILFC,
reduce debt and focus better on its core operations.
On the other hand, the proposed acquisition of ILFC will
position Aercap as a dominant player in the aviation industry,
although the approximately $5 billion deal is likely to
deteriorate its financial leverage, at least for some time.
AIG currently carries a Zacks Rank #3 (Hold). Some
better-ranked insurers include
Old Republic International Corp.
First American Financial Corp.
Hallmark Financial Services Inc.
). All these stocks sport a Zacks Rank #1 (Strong Buy).
AMER INTL GRP (AIG): Free Stock Analysis
FIRST AMER FINL (FAF): Free Stock Analysis
HALLMARK FINL (HALL): Free Stock Analysis
OLD REP INTL (ORI): Free Stock Analysis
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