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Chinese Investment Group To Buy AIG's Aircraft Leasing Unit For $4.3 Billion

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Up, up and away (Photo credit: Wikipedia)

Chinese direct investments in North America are on a roll. On Friday, Canada approved a $15 billion oil-company sale to state-owned CNOOC, the biggest single overseas acquisition by a Chinese firm. Now it's AIG, the American insurance firm that hit the wall in 2008, in the spotlight. It said Sunday that it had agreed to sell 80.1% of its aircraft leasing unit to a Chinese consortium for $4.3 billion. The investors have an option to acquire an additional 9.9% of International Lease Finance Corp., subject to U.S. federal approval for the initial disposal. AIG has been shopping ILFC around as it sells off assets to repay the federal government, which kept it solvent in 2008. The Chinese investors are led by China New Trust Co Ltd, a trust fund that is 20%-owned by Barclays Capital, and include an aviation fund and a private-equity fund. AIG said two other investors - ICBC and New China Life Insurance - would participate in the secondary disposal. The deal values ILFC, which has over 1,000 aircraft in its portfolio and operates in 80 countries, at $5.3 billion.

New China Trust was founded in 1979 and is known for capital raising in property and infrastructure. Barclays Capital said in 2008 that it has "an excellent track record providing bond underwriting for local financial institutions and corporates." Lending to local governments was a lucrative business after China turned on the stimulus taps in 2009, but banks have become more circumspect over the last year or so. New China Trust may find the airline industry an easier ride, particularly in China where state-owned airlines are in a sweet spot. ILFC will remain headquartered in Los Angeles, and employs 450 U.S.-based staff. Bloomberg reports that AIG's CEO Robert Benmosche told staff in a memo on the sale that ILFC's new owners were ready to expand in China and other emerging markets. This will allow AIG to focus on its core property-casualty and U.S. life insurance business, he said. AIG stock closed up 2.6% Friday at $34.13.