US insurance company American International Group (AIG) is expected to further reduce its shareholding in operating lessor ILFC during the next several years, say market sources.
European lessor AerCap announced on 16 December 2013 that it agreed acquire 100% of the common stock of ILFC in a $26 billion deal funded by UBS and Citibank.
Upon closing of the transaction, which is expected in the second quarter of this year, AIG will own approximately 46% of the combined company, while the existing AerCap shareholders will own approximately 54%.
“The transaction is essentially like an IPO,” says a source. “AIG sold the first tranche and if it goes well they will probably sell it down overtime.” He expects this to happen over the next three to five years period.
Avolon’s head of strategy Dick Forsberg agrees. In a note published on 1 January 2014, he says the transaction has “significantly lower execution risk” than earlier proposals and, although AIG will retain a meaningful investment in the leasing sector for the time being, it does reduce the scale of the initial stage of the trade.
“Over time, AIG will be able to divest its shareholding in the investor market, a process that could begin within 12 months,” he says.
Forsberg also expects the transfer of the ILFC portfolio to Ireland will raise the Irish share of aircraft lease management from 40% to almost 55%, whilst the US share will fall from 30% to below 20%.