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AIG to sell jet-leasing unit for $5.4 bln; shares gain

Last updated: 09:30 16 Dec 2013 EST, First published: 10:30 16 Dec 2013 EST

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American International Group Inc. (AIG) (NYSE:AIG), once the world's largest insurer, rose in morning trades after saying it agreed to sell International Lease Finance Corp., the world’s second-largest aircraft lessor, to AerCap Holdings NV (NYSE:AER) for $5.4 billion.

AIG shares advanced 1.7 percent to $50.50 at 10:02 a.m. in Toronto, stretching this year's gains to 43 percent. Shares of AerCap leaped 30 percent to $32.51.

The deal includes $3 billion in cash and 97.56 million newly issued AerCap common shares, the New York-based insurer said in a statement today. The sale will give AIG a 46 percent stake in AerCap. The transaction is expected to close in the second quarter of 2014, AIG said.

"[T]he transaction will have a positive impact on AIG’s liquidity and credit profile and will enable us to continue to focus on our core insurance businesses,” Chief Executive Officer Robert H. Benmosche, who took over in 2009, said in the statement.

AIG, which was nearly wiped out by derivative bets in the financial crisis, has been trying for at least four years to sell ILFC to help repay the costs of a 2008 U.S. government bailout. The transaction marks AIG's exit from its last non-core business. To help repay the rescue, AIG sold more than $70 billion in assets such as Asian insurers and a U.S. consumer lender.

AIG sold ILFC to Schiphol, Netherlands-based AerCap after investors led by Hong Kong-based P3 Investments Ltd. failed to deliver the $4.2 billion that they agreed to pay for an 80 percent stake. AIG paid $1.16 billion for ILFC in 1990, according to Bloomberg.

AerCap, which buys aircraft and rents them to airlines, will competed with General Electric's (NYSE:GE) Gecas unit as the world's largest aircraft-leasing company by fleet size after the deal. ILFC will become a wholly owned sUBSidiary of AerCap.  

UBS acted as the financial adviser to AerCap while Goldman Sachs was the financial adviser to AerCap's board.

ILFC has been led since May 2010 by Henri Courpron, a former Airbus SAS executive. The Los Angeles-based business has had a fleet of 922 aircraft with a book value of $32.7 billion as of Sept. 30, it said.

 

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