AIG selling aircraft-leasing business for $5.4 billion to AerCap

AIG announced Monday it is selling its aircraft-leasing business International Lease Finance Corp. for $5.4 billion in cash and stocks to Netherlands-based AerCap Holdings. 

The announced sale comes five years after American International Group first tried to unload the aircraft-leasing business, one it considered a non-core business unit after it bought Century City-based ILFC in 1990 for $1.3 billion in a stock swap. 

AIG had been trying to shed the unit since 2008, when the New York company nearly collapsed and was forced to go under government control.

AerCap is also an aircraft-leasing company and has offices around the world, including Ireland and the U.S.

Under the terms of the deal, AIG said it will get $3 billion in cash and about 97.6 million shares of AerCap Holdings NV -- about 46% of AerCap's stock.

“This transaction creates a strong foundation for ILFC and positions it for continued market leadership and strategic growth,” said Robert H. Benmosche, AIG's chief executive. AIG also agreed to provide a $1-billion, five-year unsecured revolving credit facility, which will be available when the deal closes. 

The transaction is expected to close in 2014's second quarter and is subject to regulatory approval.  

AIG's ownership of ILFC dates back to 1990 when it purchased the aircraft leasing firm for $1.3 billion in a stock swap. The sale was beneficial for ILFC because it was able to leverage AIG's then-stellar credit ratings to access billions of dollars in short-term, lower-interest debt to buy planes.

But those benefits changed with the financial collapse, and ILFC has struggled to borrow money. That forced AIG to tap financing from the Federal Reserve Bank of New York in an arrangement set up during the AIG bailout.

The bailout also placed restrictions on executive compensation, which caused a mass exodus of ILFC's management team. The biggest blow came in February 2010 when company co-founder and then-Chief Executive Steven Udvar-Hazy abruptly left to start a rival business, Air Lease Corp., also based in Century City.

AIG share rose $0.72, or 1.44%, to $50.44 in Monday morning trading.

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