PE-backed Chinese consortium to buy AIG’s aircraft leasing business

The consortium, comprising New China Trust, China Aviation Industrial Fund and Ng's P3 Investments, has agreed to buy 80.1% of ILFC for approximately $4.23 billion, AIG said in a statement. They have the option to buy an additional 9.9% stake, which means AIG will retain an interest of at least 10%. The transaction values ILFC at $5.28 billion.

Once the appropriate approvals have been granted by Chinese regulators, the consortium will be expanded to include New China Life Insurance and an investment arm of ICBC International, the Hong Kong unit of Industrial and Commercial Bank of China. Regulatory approval is also required on the US side.

Weng Xianding, chairman of New China Trust, is leading the investor group. "Our group shares a commitment to ILFC's experienced management team, its operating philosophy, and its presence in the US," he said. "This transaction allows ILFC to continue to serve its worldwide partners in the aviation industry with world-class service while accelerating its growth in important markets, including Asia."

ILFC is the world's second-largest jet-leasing company by assets after General Electric's Gecas unit. It has more than 1,000 owned or managed aircraft and a customer base of 200 airlines in 80 countries. More than 180 of these aircraft are operating with airlines in China, Hong Kong and Macau, according to Ascend.

While there were fewer than 20 business jets in China during the mid-2000s, the number is expected to reach 200 at the end of this year. By 2030, it is expected to be 2,470, based on compound annual growth of 15% over the next 20 years. This has prompted NetJets, a private aviation company owned by Warren Buffett's Berkshire Hathaway, will form a China joint venture with local private equity players Hony Capital and Fung Investments.

Asian interest in aircraft leasing stretches beyond China. In October, Oaktree Capital Group has sold Jackson Square Aviation to Japan's Mitsubishi UFJ Lease & Finance Co. for JPY100 billion ($1.3 billion). The deal, which involves the sale of Jackson Square's parent JSA International Holdings, will be completed in December, and will add around 70 planes to Tokyo-based Mitsubishi UFJ's commercial-aircraft fleet.

In January, two other Japanese players, Sumitomo Mitsui Financial Group (SMFG) and Sumitomo Corp, agreed to purchase Royal Bank of Scotland's (RBS) aircraft-leasing business in a deal worth $7.3 billion. SMFG will take around 70% of RBS Aviation Capital, with trading company Sumitomo holding the rest. The Japanese team narrowly beat out China Development Bank.

Last year, Government of Singapore Investment Corporation (GIC) paid $300 million for a 20% stake in Dublin-based aircraft-leasing group Avolon. The company is owned by private equity firms CVC Capital Partners, Civen and Oak Hill Capitall Partners.

It emerged last week that Primus, the private equity firm set up by Ng in conjunction with two former colleagues from Citigroup, Robert Morse and Guocang Huan, had closed its fund and was returning capital to investors. Huan has since reemerged with GCS Capital and is currently engaged in exclusive talks to buy Dexia's asset management arm.

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• Topics
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