Thanks for the interview info. Trying to decide whether I want more of the common AIG or more of AVF. This article from Bloombergs on the aircraft leasing biz worth an est. $7-14B.
Might be an employee spin-off and buyout:
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AIG Plane Unit Draws Down $6.5 Billion Credit Line (Update2)
By Erik Holm
Sept. 19 (Bloomberg) -- International Lease Finance Corp., the airplane-leasing company owned by American International Group Inc., said it is borrowing $6.5 billion in emergency funding, the maximum amount allowed under its three credit lines.
The cash, coupled with revenue from operating activities, will be ``sufficient to meet its debt obligations into the first quarter of 2009,'' the Los Angeles-based company said in a regulatory filing.
``ILFC needs liquidity to survive, and this is its final source of liquidity,'' said David Havens, a credit analyst at UBS AG in Stamford, Connecticut. ``This ups the volume on the need for ILFC to be sold to a well-financed buyer.''
ILFC asked its lenders for the cash on Sept. 16, the day New York-based AIG agreed to give the government an 80 percent stake of itself in exchange for an $85 billion loan. Edward Liddy, the new chief executive officer of AIG, the largest U.S. insurer, is looking to sell units to pay back the government.
Credit-default swaps on ILFC fell 97 basis points to 645 basis points, according to CMA Datavision. The derivatives, which banks or credit investors use to hedge against losses or to speculate on a company's creditworthiness, rise as confidence deteriorates.
Contracts on the Markit CDX North America Investment Grade Index, linked to the bonds of 125 companies in the U.S. and Canada, dropped 30 basis points to 150 basis points in New York, according to broker Phoenix Partners Group.
Commercial Paper
ILFC drew on the lines to ``provide it with liquidity to repay its commercial paper and other general obligations as they become due,'' the leasing company said. The first of the credit lines is to be repaid by October 2009, the regulatory filing said.
AIG's unit that makes home and auto loans, American General Finance Inc., said today in a separate filing that it borrowed $4.58 billion under its credit facilities, and said it too asked for the money on Sept. 16.
John Leahy, chief operating officer of No. 1 aircraft maker Airbus SAS, said he has no concern about ILFC's creditworthiness. The credit line makes him confident ILFC, Airbus's biggest customer, will take delivery of the planes the company has ordered, he said.
``We haven't seen anything that fundamentally changes expectations for financing and delivering our backlog, including our backlog with our leasing customers,'' said John Dern, a spokesman for Chicago-based Boeing Co. ILFC is one of Boeing's largest customers with 102 aircraft on order, which is 2.8 percent of Boeing's total backlog of 3,696 planes.
Profits Rise
Second-quarter operating income from the insurer's aircraft leasing unit rose 85 percent to $352 million as the company expanded its fleet and charged more to rent planes. AIG, the industry's biggest lessor by aircraft value, got 4.3 percent of its revenue last year from the business and more than 80 percent from property-casualty and life insurance operations.
Leahy said he expects Steven Udvar-Hazy, the CEO and founder of ILFC, to try to buy back the company from AIG. Udvar-Hazy didn't return messages seeking comment.
AIG shares gained $1.16, or 43 percent, to $3.85 at 4:15 p.m. in New York. The insurer declined 93 percent this year on writedowns of credit-default swaps tied to U.S. home loans.
A basis point on a credit-default swap contract protecting $10 million of debt from default for five years is equivalent to $1,000 a year.
AIG should sell the plane unit, with has ``minimal synergies'' with insurance, Bank of America Corp. analyst Alain Karaoglan said before the federal takeover. The unit could fetch $7 billion to $14 billion, he said at the time. Liddy's predecessor at AIG, Robert Willumstad, had ruled out selling the business.
To contact the reporter on this story: Erik Holm in New York at eholm2@bloomberg.net.
Last Updated: September 19, 2008 19:45 EDT
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