ILFC Holdings, Inc. (ILFC Holdings) has filed a registration statement with the US Securities and Exchange Commission for a proposed initial public offering (IPO). ILFC Holdings, a subsidiary of AIG Capital Corporation (AIG Capital), is a direct wholly owned subsidiary of American International Group, Inc. (AIG).

Prior to the completion of the IPO and subject to certain conditions, AIG Capital will transfer 100% of the common stock of International Lease Finance Corporation to ILFC Holdings.

AIG has determined that ILFC is not one of its core businesses. The IPO is the first step in AIG's plan to monetize its interest in ILFC by selling ILFC Holdings' common stock. AIG, through AIG Capital, intends to sell more than 20% of ILFC Holdings' outstanding stock in the IPO. The number of shares to be offered, the price range, and the timing for the proposed IPO have not yet been determined.

Holdings and ILFC will not receive any proceeds from the IPO. AIG has requested a private letter ruling from the US Internal Revenue Service that AIG Capital's transfer of ILFC's common stock to ILFC Holdings will qualify for an election under Section 338(h)(10) of the Internal Revenue Code of 1986, as amended, provided that certain conditions are met.

Among those conditions is that in the event AIG Capital does not sell more than 50% by value of its interest in Holdings in the IPO, AIG Capital must dispose of more than 50% by value of its interest in Holdings within two years after the completion of the IPO. In addition, pursuant to a Plan of Divestiture that AIG will adopt, AIG Capital intends to dispose of at least 80% by value of its interest in ILFC Holdings within three years after the completion of the IPO.

AIG currently expects that AIG Capital will reduce its ownership interest in ILFC Holdings through one or more additional public offerings of ILFC Holdings' common stock and, possibly, through one or more privately negotiated sales of ILFC Holdings' common stock, but it is not obligated to divest ILFC Holdings' shares in this or any manner.

ILFC reports that the IPO may not occur in a timely fashion, or at all, due to market or other conditions. AIG will be required to obtain the consent of the Department of the Treasury pursuant to the Master Transaction Agreement, dated December 8, 2010, between AIG and the Department of the Treasury in order to complete the Reorganization, the IPO and certain related transactions.

ILFC expects AIG will obtain the required consents from the Department of the Treasury prior to completion of these transactions. In addition, if AIG ceases to beneficially own at least 51% of ILFC's outstanding common stock, an event of default will occur under ILFC's credit facility entered into on October 13, 2006, which had approximately $835m aggregate principal amount outstanding as of August 26, 2011. ILFC intends to seek the necessary lender consents or prepay this credit facility prior to the occurrence of this event of default.

AerCap acquisition

The news comes barely one month after the announcement that ILFC had signed an agreement with AerCap Holdings to acquire its AeroTurbine subsidiary.

The acquisition of AeroTurbine aimed to provide synergies and allow ILFC to realize more value from its fleet portfolio. A company statement said: “These synergies will maximize the value in the remaining life and ultimate disposition of aircraft and provide a tool to optimize future aircraft portfolio and operational acquisitions. ILFC will be working with AerCap to close the acquisition over the coming months.”

At the time ILFC’s chief executive officer Henri Courpron commented: “The acquisition of AeroTurbine offers a new compelling strategic solution to maximize value across the complete life cycle of an aircraft. The ability to exercise this level of control over our assets will enhance value and as importantly, inspire new dialogue with airlines with respect to their fleet strategies.”

Historically, ILFC has identified opportunities to sell aircraft on lease prior to their entering end-of-life phase with part-outs pursued on only a small number of aircraft. The strategic acquisition of AeroTurbine will offer an integrated value proposition increasingly sought by our customers around the world. Citigroup Global Markets Inc. acted as financial advisor to ILFC.