AIG Group, the parent of the giant lessor International Lease Finance Corp, on 8 May reported a huge net loss of $7.81 billion in the first quarter, prompting the insurance conglomerate to announce plans to raise $12.5 billion in new capital.
ILFC reported operating income of $272 million for the quarter, an increase of 40.9% year-over-year. Revenue was not immediately reported. The gain was attributable to higher lease rates, aircraft sales and higher “utilisation.”
On the same day, Fitch Ratings lowered the ratings of AIG Capital Corp (AGICC) and its main subsidiaries, American General Finance (AGF) and ILFC following rating actions taken on AIG, the ultimate parent company for AIGCC.
All ratings remain on credit watch negative.
In the first-quarter, AIG reported "sizable" market value losses related to CDOs and derivatives activities, says Fitch. As a result, the ratings of AIGCC, AGF and ILFC remain on rating watch negative pending successful execution of AIG's capital raising plans. Assuming timely completion of AIG's capital raise, Fitch would expect to affirm AIGCC, AGF and ILFC's ratings, with a stable outlook.
Fitch notes the relative good performance of ILFC.
"ILFC continues to benefit from an upcycle in aircraft finance and exposure is mostly to non-US airlines," says the rating agency.
However, Fitch cautions that if AIG were to change targeted leverage ratios, ratings for ILFC would be revisited.
ILFC had $32 billion in outstanding debt at 31 March, an increase of $817 million from 31 December.
Among other highlights in the 1Q08 10Q filing:
• ILFC’s Boeing 787 order—all 74 of them—will be delayed by an average of “in excess” of 27 months. Deliveries were originally to begin in 2010.
• ILFC had 921 owned aircraft in its fleet at 31 March, up from 856 a year before.
• Only one aircraft was off-lease at the end of the quarter.
• All new aircraft scheduled for delivery this year are under contract for lease.
• After 31 March, 13 aircraft were returned by bankrupt airlines; 10 already have been re-leased.
ILFC rating action according to Fitch:
--Long-term IDR to 'A' from 'A+';
--Senior unsecured debt to 'A' from 'A+';
--Preferred stock to 'A-' from 'A';