Aircraft Leasing Company Flying Into Rough Skies

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The legal and financial troubles that have engulfed American International Group Inc. have trickled down to the insurance giant’s prosperous Century City-based aircraft finance unit, the No. 1 player in aircraft leasing.


AIG’s International Lease Finance Corp. unit is expected to have a tough time navigating Wall Street’s fickle credit markets due to the accounting improprieties uncovered after the departure of AIG’s former chief executive, Maurice R. “Hank” Greenberg.


In the past few weeks, every major credit ratings agency has downgraded AIG, affecting some $26 billion of the company’s senior debt. Last month, Fitch Ratings put International Lease Finance on “ratings watch negative,” after AIG delayed the filing of its annual report, while Standard & Poor’s placed the aircraft lease company’s corporate credit and senior unsecured debt ratings on “CreditWatch negative,” citing AIG’s negative ratings.


In the short-term, the credit downgrades will make borrowing more expensive for International Lease Finance, which was founded in 1983 by Steven Udvar-Hazy, the son of Hungarian immigrants, and his two partners the father-son team of Leslie Gonda, a Hungarian Holocaust survivor, and his son, Louis Gonda.


International Lease Finance, which owns a fleet of more than 800 commercial aircraft, has relied heavily on its relationship with AIG and the clout the insurer once brought to the capital markets. That alliance helped International Lease Finance leapfrog ahead of its closest competitor in revenues, General Electric Co.’s GE Capital Aviation Services (though the GE unit leases more planes worldwide). The two companies also have different strengths: International Lease Finance excels in the foreign market, while GE’s unit dominates the domestic sector.


While analysts and government regulators are only beginning to pick apart the complex interactions between AIG and its various financial and insurance units, questions have been raised about transactions between International Lease Finance and General Re Co., the reinsurance unit of Berkshire Hathaway, which is run by billionaire Warren Buffett.



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The full version of this story

is available in the May 9 edition of the Los Angeles Business Journal.

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