Maxing Out Three Credit Lines Raises $6.5 Billion In Emergency Funding

International Lease Finance Corporation is borrowing a total of $6.5 billion against its three credit lines to help keep the company solvent into the first quarter of 2009. The funds were requested on September 16 -- the same day its parent company, American International Group, obtained an $85 billion loan from the US government.

The loan has served to bolster confidence in ILFC, according to Bloomberg reports, with credit-default swaps on ILFC down 97 basis points, and contracts on the NAIG Index down 30 points. Major aircraft manufacturers are also expressing their trust in ILFCs liquidity, as second-quarter operating income grew to $352 million, an 85 percent increase attributed to fleet expansion and increased rental rates.

Airbus SAS CEO John Leahy said that he is confident that ILFC, which is Airbus' biggest customer, will take delivery of ordered aircraft. Boeing spokesman John Dern said, "We haven't seen anything that fundamentally changes expectations for financing and delivering our backlog... with our leasing customers." ILFC currently has 102 aircraft on order from Boeing.

Speculation continues as to whether former CEO and founder of ILFC Steven Udvar-Hazy will try to buy the company back from AIG, as ANN reported. Prior to the federal takeover, analyst Alain Karaoglan had recommended that AIG sell ILFC, predicting the sale might bring $7 billion to $14 billion.

Speaking about the recent loan, credit analyst David Havens said, "This ups the volume on the need for ILFC to be sold to a well-financed buyer. ILFC needs liquidity to survive, and this is its final source of liquidity."

Repayment of the first of the three credit lines is due by October 2009.

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