MINNEAPOLIS — There was a time when buyers would have lined up for a chance to buy one of the world’s largest aircraft owners.
But months after American International Group Inc. hung a “For Sale” sign on its aircraft leasing subsidiary International Lease Finance Corp., no deal has closed. AIG is trying to sell assets to repay the $60 billion federal loan that helped it avoid collapse this fall. But the same frozen credit markets that hurt AIG are making it hard to find a buyer for debt-laden ILFC and the planes it values at some $50 billion.
ILFC should be one of AIG’s most attractive assets, in part because it has nothing to do with the troubled housing finance sector. Its 950 planes make up the world’s second-largest fleet, behind only GE Commercial Aviation Services.
In the U.S., ILFC’s customers include American Airlines, Delta Air Lines, JetBlue and US Airways, although 90 percent of its business is done internationally. That has insulated it from the ups and downs of U.S. airlines. Its planes are locked into leases, giving it a steady revenue flow.
Most travelers don’t care who owns a particular plane. But ILFC’s fate is being closely watched in the aviation industry, in part because of what it says about lenders’ appetite for airplanes, and in part because ILFC is the biggest buyer of Airbus planes and among the largest Boeing customers.
One key to ILFC’s success has been its ability to borrow cheaply to buy all those planes — in part because of AIG’s backing, said Fitch Ratings analysts William Artz and Christopher Wolfe. Indeed, ILFC’s bank debt has a covenant that says it must be at least 51 percent owned by AIG. That brings the banks in as potential negotiators of a sale.
“If the buyer is weaker, they may have issues with it, and it may have some impact on the ability to sell ILFC,” Artz said.
ILFC’s debt stood at $35.72 billion as of Sept. 30.
ILFC has maxed out its revolving credit line, saying that money plus cash from operations will be enough for it to meet its debt payments “into the first quarter of 2009.”
ILFC is also required to make progress payments to aircraft manufacturers while planes on order are being built. As of Sept. 30, the company said it had committed to buying 174 new Airbus and Boeing planes for delivery through 2019, for about $16.9 billion.
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