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
"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
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.