AIG Aircraft Leasing Unit Signs On As Fed Guarantor
By Lavonne Kuykendall, Of DOW JONES NEWSWIRES
CHICAGO -(Dow Jones)- American International Group Inc. (AIG) has used some of
its government credit line to help prop up its aircraft leasing business. Now,
that unit has agreed to help pay the money back.
AIG helped subsidiary International Lease Finance Corp. with its cash needs by
extending a loan of $1.7 billion in March, as it searches for a buyer for the
capital-intensive aircraft leasing business. In October, AIG gave ILFC another $
2 billion, and extended the repayment terms of the original $1.7 billion loan,
bringing the total ILFC owed AIG to $3.7 billion.
The Federal Reserve Bank of New York required ILFC to sign on as a guarantor
of the loans before it approved the second loan and extension.
ILFC said that it is backing that guarantee with a portfolio of aircraft and
related equipment and leases worth approximately $7.4 billion, plus an
additional temporary collateral of $10 billion worth of equipment that will be
released when ILFC fulfills some conditions. ILFC is also securing the loans
with income from some collection accounts and shares or equity interests of
subsidiaries that may own or lease the pledged aircraft in the future.
ILFC also said it agreed to repay the loans in full if AIG sells all or some
of its interest in the company.
In its own quarterly earnings report, AIG said that it plans an additional
drawdown of $2.1 billion from its Department of the Treasury Commitment on Nov.
13 to purchase ILFC common shares.
AIG has reportedly been in talks with several interested parties, including
Steven F. Udvar-Hazy, ILFC's founder and chief executive, to sell off a portion
of its airplane portfolio.
An ILFC spokeswoman did not immediately return a phone call asking for
comment.
-By Lavonne Kuykendall, Dow Jones Newswires; (312) 750 4141;
lavonne.kuykendall@dowjones.com
(END) Dow Jones Newswires
11-09-091522ET
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