AMERICAN International Group’s aircraft leasing division has sold 53 aircraft to Macquarie Group for $US1.99 billion ($2.1bn), as the Australian investment bank continues to ramp up its leasing businesses by snapping up assets of companies that are yet under pressure following the global financial crisis.

The AIG unit, International Lease Finance, is one of the world’s largest airplane lessors, and last month said it was seeking to raise up to $US3.5bn from asset sales.

The unit has $US6.8bn in debt due this year that is being serviced with AIG loans effectively backstopped by the New York Federal Reserve and secured by aircraft.

ILF remained profitable in the downturn but AIG remains heavily dependent on government aid. AIG originally considered selling the unit to reduce its debt and raise capital but later decided to offload parts of its fleet in deals, such as the one announced today.

Alan Lund, ILF’s new CEO, said that the company’s ability to garner large aircraft sales along with its success in tapping financial markets “strongly demonstrates ILF’s ability to generate liquidity and de-lever its balance sheet”.

Macquarie’s purchase of the AIG portfolio follows the investment bank’s acquisition of a $1bn portfolio of vehicle leases and loans from the Australian arm of manufacturing giant Ford Motor last October.

One analyst said Macquarie appears to have paid a “quite attractive” price for the AIG aircraft, given it was well below the $US2.32bn book value of the assets.

“Macquarie has every cycle sought to pick up very attractive businesses and assets in the wake of financial crises, and this is another transaction on the back of several last year that epitomised that,” said the analyst from a major broking firm.

Macquarie Group has used the financial crisis as an opportunity to bulk up by spending its surplus capital. Other assets the group picked up last year include Canadian energy trading advisory firm Tristone Capital, boutique investment firm Fox-Pitt Kelton and US-based asset manager Delaware Investments.

As of last December 31, Macquarie had $11.5bn of capital, $4.5bn of which was in excess of the group’s minimum regulatory requirements. Its acquisition of Delaware, which closed last January, was expected to take excess capital to about $4bn.

Macquarie Group leases assets through its corporate and asset finance division, which had loans and leases under management of $13.8bn as at December 31. Its existing aircraft leasing business includes its wholly-owned Macquarie Asset Leasing Trust, which owns nine aircraft on lease to Australia’s biggest airline, Qantas Airways.

Said Macquarie Group’s chief financial officer, Greg Ward: “This transaction leverages Macquarie’s existing expertise in asset leasing, demonstrates the strength of our aircraft management capabilities and diversifies the client base of our aircraft fleet.”

Of the 53 aircraft in the AIG portfolio, Macquarie said it would retain 47 and transfer to its 37.5 per cent-owned Macquarie AirFinance the right to purchase the remaining six from AIG on similar terms.

Macquarie AirFinance is a global aircraft leasing company that in 2006 purchased GATX Air. Prior to the deal with AIG, Macquarie AirFinance owned or managed 124 jet aircraft leased to 57 operators in 30 countries.

Macquarie Group said the 47 aircraft it intends to retain are young, modern aircraft on lease to 35 airlines in 27 countries. The weighted average life of the fleet is less than four years and the average remaining lease term is more than five years. Boeing 737 Next Generation and Airbus A320 Family aircraft make up more than 70 per cent of the portfolio.

The sale will increase the average age of ILF’s remaining fleet to 7.6 years, from 7.4 years.

ILF recently lost its interim chief executive, less than two months after he assumed the post, because of federal compensation limits. AIG chief executive Robert Benmosche has said the unit’s ability to sell $US750 million in bonds last month reflected investor confidence in the group.

The AIG-Macquarie deal is expected to be completed by the end of this year.

Macquarie said the impact of the deal on its regulatory capital surplus was not expected to be material.

Source: The Australian.com