Business Irish

Thursday 29 September 2016

Insurance giant AIG lines up $4bn AerCap sale

Sonali Basak

Published 02/04/2015 | 02:30

Aengus Kelly, chief executive officer of Aercap
Aengus Kelly, chief executive officer of Aercap

Insurance giant American International Group (AIG) is teeing up a $4bn (€3.7bn) sale of shares in AerCap, the Irish run aircraft leasing business.

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AerCap, under chief executive Aengus Kelly, is tipped as a potential buyer of the stake itself.

The aviation leasing company is the biggest independent aircraft lessor and just one of the major players in the sector based here. The Irish aviation leasing industry emerged from the old Guinness Peat Aviation (GPA) where Aengus Kelly was an executive.

AerCap alone controls €39bn of aircraft.

AIG has now registered to sell a 46pc stake in AerCap for a price that values the holding at more than $4bon, as the US insurer streamlines it operations.

In a sale, AIG would offer 97.6 million shares of AerCap at a maximum price of $43.74 each, AerCap said in a regulatory filing.

AIG ended up with the shares as a result of the sale of its leasing business International Lease Finance to AerCap, last year, a deal that was financed with the stock.

AerCap said that the AIG offering price may change because the share value is only an estimate.

AIG chief executive Peter Hancock said in February that the insurer is in no rush to sell the stake.

Mr Hancock said in his first annual letter to investors on Monday that he looks to keep exiting businesses that don't align with AIG's most lucrative operations, which are property and casualty, life and retirement coverage.

"Potential long-only investors have remained on the sidelines due to this large overhang" of AerCap's stock, Helane Becker, an analyst with Cowen & Co, said in a note.

"The sale will create liquidity and introduce more long-term owners to the stock providing stability."

AIG was required to retain its entire AerCap stake for at least nine months following the completion of the ILFC deal, after which it could dispose of one-third of its shares.

The insurer then has to wait another three months to cut its holding to 33pc and can completely exit three months after that.

AerCap is listed on the New York Stock Exchange.

Its shares were weaker at $43.60 each on Wednesday in New York, having climbed 12pc this year.

Global player AerCap has more than 200 customers for its aircraft in 90 countries.

It and General Electric-controlled GECAS, which also emerged from GPA, and is based in Shannon, Co Clare, are now the dominant players in the world market, controlling close to half of all lessor-owned aircraft globally. As the sector consolidates Aengus Kelly said in a recent interview with Reuters that there was no sign of a glut of jetliners that could trigger a cyclical downturn.

AerCap is seeing consistent demand for the latest, fuel-saving jets and older workhorse planes, Mr Kelly added.

Concern about a glut of airliners has hung over aerospace investors for more than a year as Boeing and Airbus boost output to fill large order backlogs - including from the likes of Ryanair and emerging Asian operators.

Speaking after AerCap's latest results in February, Mr Kelly said the sector outlook remains strong, and low oil prices are a "tax cut" for airlines and consumers that could spur travel demand.

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