Published: Thursday, March 26, 2009
AIG woes could hurt Boeing
With 94 Boeing jets on order, ILFC warns that its future depends on the insurance giant staying afloat.
EVERETT -- A major Boeing Co. customer needs funding from its troubled parent company, American International Group, AIG, or another source to stay afloat.
International Lease Finance Corp. warned its future is in jeopardy in a regulatory filing Wednesday.
"We have been significantly and adversely affected by recent events in the marketplace, including challenges faced by AIG," the aircraft leasing company said in a filing to the Securities and Exchange Commission.
ILFC said it borrowed $800 million on March 12 from AIG to fund its debt through the end of the month. But the buyer of Boeing and Airbus aircraft will need additional funding, roughly $900 million, for debts that come due in April. Although AIG has approved an additional loan, that funding will be subject to scrutiny by the U.S. government, which is bailing out the insurance giant.
In its filing, ILFC noted that AIG believes it can meet financing obligations over the next 12 months or until AIG can sell off the aircraft lessor. But ILFC warned that the outcome of AIG's plans could be different or its judgments may be "incorrect."
Outside funding may be difficult for ILFC to obtain given the tight credit market and the leasing company's ties to AIG. ILFC said the lowering of AIG's credit rating as well as increased volatility in the aviation industry also could hinder the company's ability to receive financing from another source.
"Our business is also subject to numerous other risks and uncertainties. … Many of these risks are interrelated and the occurrence of certain of them could in turn cause the emergence, or exacerbate the effect, of others. Such a combination could materially increase the severity of the impact on us," ILFC said in its filing.
But local analyst Scott Hamilton, with Leeham Co., doesn't see ILFC's troubles creating huge problems for Boeing or Airbus. "I don't think the federal government would ever let ILFC go into bankruptcy," Hamilton said.
Still, "the risks are there," he added.
If ILFC can't find funding for its Boeing jet deliveries, the leasing company likely will get a hand from the Boeing Capital Corp., the aerospace company's financing arm.
"This is Boeing's biggest customer," Hamilton said.
ILFC has 94 aircraft on order with the Boeing Co, including requests for 74 Boeing 787s.
Boeing officials already have said the company may have to step in and finance jet orders for customers this year. Like ILFC, airlines face declining cargo and passenger travel and a tightening credit market.
International Lease Finance Corp. warned its future is in jeopardy in a regulatory filing Wednesday.
"We have been significantly and adversely affected by recent events in the marketplace, including challenges faced by AIG," the aircraft leasing company said in a filing to the Securities and Exchange Commission.
ILFC said it borrowed $800 million on March 12 from AIG to fund its debt through the end of the month. But the buyer of Boeing and Airbus aircraft will need additional funding, roughly $900 million, for debts that come due in April. Although AIG has approved an additional loan, that funding will be subject to scrutiny by the U.S. government, which is bailing out the insurance giant.
In its filing, ILFC noted that AIG believes it can meet financing obligations over the next 12 months or until AIG can sell off the aircraft lessor. But ILFC warned that the outcome of AIG's plans could be different or its judgments may be "incorrect."
Outside funding may be difficult for ILFC to obtain given the tight credit market and the leasing company's ties to AIG. ILFC said the lowering of AIG's credit rating as well as increased volatility in the aviation industry also could hinder the company's ability to receive financing from another source.
"Our business is also subject to numerous other risks and uncertainties. … Many of these risks are interrelated and the occurrence of certain of them could in turn cause the emergence, or exacerbate the effect, of others. Such a combination could materially increase the severity of the impact on us," ILFC said in its filing.
But local analyst Scott Hamilton, with Leeham Co., doesn't see ILFC's troubles creating huge problems for Boeing or Airbus. "I don't think the federal government would ever let ILFC go into bankruptcy," Hamilton said.
Still, "the risks are there," he added.
If ILFC can't find funding for its Boeing jet deliveries, the leasing company likely will get a hand from the Boeing Capital Corp., the aerospace company's financing arm.
"This is Boeing's biggest customer," Hamilton said.
ILFC has 94 aircraft on order with the Boeing Co, including requests for 74 Boeing 787s.
Boeing officials already have said the company may have to step in and finance jet orders for customers this year. Like ILFC, airlines face declining cargo and passenger travel and a tightening credit market.
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