Says Failure To Find Money Could Endanger Survival

As they say, you're judged by the company you keep... and aircraft lessor International Lease Finance Corp. has taken it on the chin lately due to its affiliation with infamous bailout queen AIG.

The Wall Street Journal reports ILFC -- which until recently had managed to largely avoid the financial pratfalls of its parent company -- needs immediate access to new funding to shore up its short-term reserves, due to lack of unsecured credit opportunities in the current bearish economy.

Despite some $1.7 billion in loans coming to ILFC from its parent company, that will only assure the company's survival through the end of April. The company hasn't been able to find new sources for unsecured loans, as its credit rating has been downgraded to next to nothing along with AIG's. The aircraft lessor plans to back any new financing with its fleet of 955 leased aircraft.

"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," ILFC said Wednesday, in its annual report filed with the Securities and Exchange Commission.

The company's survival appears to hinge on whether the Federal Reserve Bank of New York is willing to support a third-party loan to ILFC, in spite of its connection to AIG. If that doesn't happen, "we will have to pursue alternative strategies, such as selling aircraft," read ILFC's statement to the SEC.

Despite that ominous statement, the odds ILFC will find favor with the Fed are actually pretty good. Despite its current woes, the lessor remains among the most profitable of AIG's enterprises... with a fleet worth around $50 billion, against an outstanding debt load of $32.5 billion and overall shareholder value of $7.63 billion as of the end of 2008, according to the WSJ.

ILFC President and COO John Plueger stressed in a recent interview that "[n]othing has changed whatsoever" with ILFC's successful status within the ranks AIG. "ILFC continues to meet all of its obligations," even as its parent flounders.

Even without AIG's woes, though, ILFC faces a difficult future. While the company reported $703.1 million in net income in 2008 -- a 16 percent improvement over 2007 -- mounting difficulties in the commercial airline segment spell trouble for ILFC's ability to place new planes with customers.

Selling ILFC to a new parent would probably be best for both the leasing company, and AIG... but there are few takers right now.

FMI: www.ilfc.com, www.aig.com