AIG to Sell ILFC to Management Group Next Year, Udvar-Hazy Says

By Thomas Black

Nov. 22 (Bloomberg) -- American International Group Inc., the insurer bailed out by the U.S., will sell its plane-leasing arm International Lease Finance Corp. to a group of investors and the unit’s management by early next year, an executive said.

“We’re in the process of selling ILFC to a group of investors including management that will take back the company from AIG,” Steven Udvar-Hazy, the unit’s founder and chief executive officer, said yesteray at an aviation conference in Cancun, Mexico. He suggested the unit had a value of about $10 billion and didn’t identify the investors.

“Early next year, we will consummate the closing,” he said in a subsequent interview. “One thing is to reach a deal. It’s another to close the deal.”

Udvar-Hazy’s comments confirm his involvement in the purchase and the time frame for a sale of ILFC, one of the biggest buyers of commercial jets from both Boeing Co. and Airbus SAS. The U.S. government took a controlling stake in AIG as it rescued the insurer with an infusion of capital on Sept. 17, and authorities decided to sell all units that aren’t related to the insurance business.

ILFC will separate from AIG, which bought the airline- leasing company in 1990 for $1.3 billion, because of financial losses caused by a small AIG unit that engaged in “very high risk-profile business,” Udvar-Hazy said.

AIG rose 16 cents, or 11 percent, to $1.60 yesterday in New York Stock Exchange composite trading. The shares have dropped 97 percent this year. Nicholas Ashooh, an AIG spokesman, didn’t immediately respond to a telephone message left with him.

$10 Billion Value

Udvar-Hazy implied that ILFC has a value of about $10 billion. He said that AIG’s market capitalization, not counting the stake of almost 80 percent owned by the government, is less than $5 billion or “a little more than half of ILFC’s value.”

The pending sale is “extremely good news” for both AIG and ILFC, Richard Aboulafia, an analyst with aviation consulting firm Teal Group in Fairfax, Virginia, said in an interview.

For ILFC, “no matter how sound the fundamentals of their business were, they were being dragged down by AIG’s negatives,” Aboulafia said. “For AIG, it’s good news because they need the money.”

Aboulafia said Udvar-Hazy has track record of making a profit in aviation and that he’s probably the industry’s most powerful executive as a key customer for jets. “He created this, he can run it,” Aboulafia said.

ILFC, which Udvar-Hazy founded in 1973 and took public 10 years later, will have revenue this year of about $5 billion. Net income for the first nine months was $913 million, up 39 percent from the same period last year, he said.

Total assets have topped $50 billion for the first time, he said. The company had assets of $6 billion when bought by AIG. At the end of last year, total assets per employee were $262 million, up from $225 million in 2004. The goal for total assets per worker is $300 million for 2009, he said.

To contact the reporter on this story: Thomas Black in Monterrey, Mexico, at tblack@bloomberg.net.