Back to top

Analyst Blog

American International Group Inc. (AIG - Analyst Report) is negotiating a deal with Netherlands-based AerCap Holdings NV for the sale of it aircraft leasing unit – International Lease Finance Corporation (ILFC) – as reported by the Reuters.

ILFC is the only major-most asset left for disposition at AIG. The company has long been attempting to sell off ILFC. In Dec 2012, about 80% of ILFC was vended by AIG in a deal with a Chinese consortium, comprising New China Trust Co. Ltd., China Aviation Industrial Fund and P3 Investments Ltd., for approximately $4.7 billion.

Further, the company granted an opportunity to these investors to buy another 9.9% in ILFC, taking the total deal value to about $5.28 billion. Subsequently, AIG would retain the remaining 10% stake in ILFC.

However, the deal missed three deadlines on May 15, Jun 14 and Jul 31, due to the delay in attaining regulatory approvals. Hence, AIG extended the closure of sale to Aug 31, 2013, which was missed again, as New China Trust reportedly pulled out of the deal.

Although no announcement of official termination has been made, no assurance on the culmination has appeared till date either.

Since then, AIG had begun mulling over the bid for an initial public offering (IPO) of ILFC, an option that was shelved after the deal was concurred with the Chinese consortium in 2012.

ILFC operates in over 80 countries through a vast fleet of about 1,000 aircraft worth $34 billion at the end of Sep 2013. It is also the largest customer for the Dreamliner jets. The firm also holds deals to procure new high-demand, fuel-efficient aircrafts as well as rights to buy additional 50 similar aircraft. However, the company’s financials are underperforming due to decline in revenues from flight equipment rentals, higher impairments and operating costs.

We believe the sooner the sale or IPO of ILFC takes place the quicker AIG will be able to release its blocked capital in ILFC, reduce debt and focus better on its core operations.

On the other hand, the proposed acquisition of ILFC will position Aercap as a dominant player in the aviation industry, although the approximately $5 billion deal is likely to deteriorate its financial leverage, at least for some time.

AIG currently carries a Zacks Rank #3 (Hold). Some better-ranked insurers include Old Republic International Corp. (ORI - Snapshot Report), First American Financial Corp. (FAF - Snapshot Report) and Hallmark Financial Services Inc. (HALL - Snapshot Report). All these stocks sport a Zacks Rank #1 (Strong Buy).

Please login to Zacks.com or register to post a comment.

New to Zacks?

Start Here

Zacks Investment Research

Close

Are you a new Zacks Member or a visitor to Zacks.com?

Top Zacks Features

My Portfolio Tracker

Is it Time to Sell?

One of the most important steps you can take today is to set up your portfolio tracker on Zacks.com. Once you do, you'll be notified of major events affecting your stocks and/or funds with daily email alerts.

More Zacks Resources

Zacks Rank Home - Evaluate your stocks and use the Zacks Rank to eliminate the losers and keep the winners.

Mutual Fund Rank Home - Evaluate your funds with the Mutual Fund Rank for both your personal and retirement funds.

Stock/Mutual Fund Screening - Find better stocks and mutual funds. The ones most likely to beat the market and provide a positive return.

My Portfolio - Track your Portfolio and find out where your stocks/mutual funds stack up with the Zacks Rank.

Zacks #1 Rank Top Movers for Zacks #1 Rank Top Movers

Company Symbol Price %Chg
SUPER MICRO… SMCI 27.00 +10.25%
CANADIAN SO… CSIQ 38.34 +8.18%
BANCO DO BR… BDORY 16.78 +8.05%
CENTURY ALU… CENX 26.97 +7.97%
WILLDAN GRO… WLDN 11.38 +5.86%