International Lease Finance Corp (ILFC) is exploring a number of avenues to fund its aircraft purchase commitments and future maturing obligations, saying it "cannot determine when the commercial paper or public unsecured debt markets may become available to us again".

The firm, an indirect wholly-owned subsidiary of troubled insurance giant AIG, says in a filing with the US Securities and Exchange Commission (SEC) that it is "currently seeking secured financings from banks and manufacturers" and as well as financing through aircraft sales.

At 31 December 2008, ILFC had about $800 million available for the financing of Airbus aircraft under its 2004 Export Credit Agency (ECA) facility. However, due to a recent downgrade of the company's long-term credit rating by Moody's, it "will need written consent from the agent of our 2004 ECA facility before we can fund future Airbus aircraft deliveries under the facility", says ILFC in the filing.

If these sources of liquidity are not sufficient to meet ILFC's contractual obligations as they come due over the next year, the company says it will seek additional funding from AIG, which would be subject to the consent of the NY Fed.

At the end of 2008, ILFC owned 955 aircraft, had nine additional aircraft in the fleet classified as finance and sale-type leases, and provided fleet management services for 99 aircraft.

The company has deals with Airbus and Boeing to buy 168 new aircraft for delivery through 2019 with an estimated purchase price of $16.7 billion, 49 of which will deliver during 2009.

ILFC has generally financed its aircraft purchases through available cash balances, internally generated funds and debt financings. However, it says: "A combination of the challenges facing our parent, AIG, the downgrades in our credit ratings or outlooks by the rating agencies, and the turmoil in the credit markets have eliminated our ability to issue commercial paper and public unsecured debt."

Earlier this month, ILFC borrowed $800 million from AIG Funding, a subsidiary of its parent, to fund contractual obligations through the end of March. AIG has also approved an additional $900 million loan to be provided by AIG Funding to fund ILFC's contractual obligations through the end of April, which is subject to receiving consent of the NY Fed.

ILFC, which posted a 2008 net profit of over $703 million, says that it may need to seek additional funding from AIG. "Without additional support from AIG or obtaining secured financing from a third party lender, in the future there could exist doubt concerning our ability to continue as a going concern," says the company.

AIG is currently marketing ILFC for divestiture.

Source: Air Transport Intelligence news