Parts of ILFC could be worth more than sum

Just look at the numbers: 1,046 aircraft worth $51.9 billion. That’s billion. ILFC is four times bigger than Aviation Capital Group or RBS Aviation Capital – both large lessors.

In the past ILFC has been described as a mega-lessor and although it is an ugly term it is true. It is no surprise that the sale of ILFC has been put on hold. Selling ILFC at the top of the aircraft leasing market in 2006 would have been an achievement. Selling it in one piece now would have been a deal of the century.

The obvious option is to split it into pieces. Sell the significant number of aircraft on lease to Chinese carriers to a local bank (ICBC would be most obvious buyer, but CIC – the state sovereign wealth fund is another). The Middle East leases could be sold to Abu Dhabi, Kuwait or Saudi). 

Hazy and the management team could take the rest and work with Greenbriar and Onex (who were also backed by large amounts of Middle Eastern money) and build a new ILFC.

While this is messier that selling it in one piece the deal risk is much, much lower. 

 

 

Other companies who looked at Genesis Lease

AerCap may have won but several other companies were rumoured to have been attracted to Genesis Lease’s (NYSE: GLS) low share price.

Aviation Capital Group
Owned by Pacific Life – a rare large insurer that did not get carried away with CDS or sub-prime – Aviation Capital Group acquired Boullioun and apparently came second behind AerCap.

AirCastle
Like AerCap, Aircastle is listed. It’s CEO, Ron Wainshal, was head of capital markets at Gecas so has close relationships and was a popular bidder with Genesis’ servicer. Looked hard.

Gecas
Even though Genesis was created by Gecas it did consider buying it back. However, the deal was not considered stategic to GE (unlike the  American deal last week) also may have looked bad for Gecas to sell high and buy cheap.

BOC Aviation
The Bank of China aircraft leasing company looked. However, unlikely that a Chinese company would take a public listed lessor private.

Aircraft leasing companies for sale

The leasing market has never been in such flux. Four of the top five aircraft leasing are likely to be sold in the next 12 months and the future is unclear for others. The table below shows an adapted version of Airfinance Journal’s most recent aircraft operating lease survey.

	Value ($ billions)	Aircraft	12 month outlook
ILFC	51.9	1046	For sale
Gecas	51	1884	Stable, core business
CIT	8.6	325	Likely to be sold
RBS	8	226	Non core, will be sold
Babcock & Brown Aircraft Management	7.7	286	For sale likely to be bought by Nomura
Aviation Capital Group	6.8	232	Stable, Pacific Life strong owner
BOC Aviation	5.9	123	Stable, good China Inc investment
AWAS	5	214	Unclear – TerraFirma is having tough year, but did also look at ILFC. Hard to judge
AerCap	4.2	295	Relatively stable, listed but could be seen as good value for acquirer
Aircastle	3.8	132	Relatively stable, listed but could be seen as good value for acquirer
Pembroke	3.5	102	Stable, Standard Chartered happy with acquisition
Macquarie	3.3	125	Stable, Macquarie looking for acquisitions and bid for Allco
ORIX	3.2	106	Stable, committed Japanese owner
Allco Aviation	3.1	68	Messy, largest lenders oppose Bravia Capital/HNA Group bid
DAE Capital	2.1	36	Unclear, not key Dubai Inc asset
BBAir	1.8	62	Relatively stable, listed but could be seen as good value for acquirer
GAAM	1.7	53	Relatively stable, new shareholders look committed
Genesis Lease	1.6	54	Relatively stable, listed but could be seen as good value for acquirer. For some reason there are lot’s of rumours about Genesis being  a target – more than other listed lessor but unsubstantiated
Alafco	1.4	32	Stable, expanding

 

Source: Airfinance Journal (columns value and number of aircraft), third column my personal views

 

There have been lots of unreported rumours about the listed aircraft leasing companies but nothing is clear in the space.

Quick thoughts on sales process 

ILFC is the big unknown. Some believe that the (very good) management team may leave but it is unclear why they would need to take the portfolio.  There is no shortage of aircraft  of aircraft lessors that they could acquire. Certain that Hazy, Plueger, Lund etc can get equity backers. May struggle for serious amounts of debt.
It could be a bargaining strategy by the management team. But while they clearly know the portfolio well  there are other options – other lessors would be keen to step-in and manage or service the portfolio.
This was always going to be ambitious sale. Whole business very reminiscent of GPA Aviation – but much, much bigger.

CIT – not formally on the market but likely to be sold. Big order is less attractive now.

RBS – Feeling personally guilty for creating the media hype surrounding this story after revealing Goldman Sachs’ role. Not sure why it has been picked up by everyone. We all knew it was a non-core business Key point here is that there is no hurry to sell it

Babcock & Brown Aircraft Management – the sale to Nomura seems to be progressing well. The Japanese bank is an obvious buyer. Would be great to see a deal close.

Allco Aviation – I have spent hours on this and can not read what is going to happen. Very frustrating situation for everyone involved. My guess is that we will see at least one aircraft transaction tested in an Australian court to see if lenders need unanimous verdict. I have a lot of sympathy for HNA and Bravia who thought their bid would be highest but most of all for Allco employees. However, lenders also feel committed to there shareholders. Very messy.