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Air Lease IPO Raises $802.5M

Air Lease Corp., an aircraft leasing company backed by Leonard Green & Partners, Ares Management and Wilbur Ross’s WL Ross & Co., raised $802.5 million in its initial public offering Monday, Reuters reported. The company sold 30.3 million shares, for $26.50 each, which was more than expected. Air Lease had planned to sell 25 million shares for $25 to $28 each, Reuters wrote. The company is based in Los Angeles, and will use the proceeds to complete roughly $6.8 billion in aircraft purchases.

(Reuters) – Air Lease Corp, an aircraft leasing company founded by the industry’s unofficial godfather, Steven Udvar-Hazy, raised $802.5 million in its initial public offering on Monday.

The company sold 30.3 million shares, more than expected. It sold the shares for $26.50 each, the midpoint of the proposed range, an underwriter said. Air Lease had planned to sell 25 million shares for $25 to $28 each.

Backed by Leonard Green & Partners, Ares Management and Wilbur Ross’s WL Ross & Co, the Los Angeles-based Air Lease has a fleet of 46 aircraft. It plans to use the proceeds to complete about $6.8 billion in aircraft purchases.

Hazy made his name — and a fortune — after co-founding in 1973 International Lease Finance Corp, an aircraft leasing company he built up to be the world’s largest. He sold it to the American International Group Inc (AIG.N) in 1990.

Together with General Electric’s (GE.N) Commercial Aviation Services, ILFC has long dominated the plane leasing space, leaving just over half of the market to the remaining, smaller players.

AIG’s blue-chip credit rating had long helped ILFC get cheap capital to buy planes, but during the financial crisis AIG’s troubled finances locked ILFC out of the debt market, taking away its ability to borrow money for plane acquisitions.

Amid debates over the lessor’s finances and after an unsuccessful bid to buy ILFC back, Hazy left the company in February 2010 to start Air Lease, and took members of top management with him.

AIG has repeatedly signaled it may sell ILFC, but nobody so far has offered to pay what the insurer thinks its aircraft leasing arm is worth.

Once publicly traded, Air Lease will be ILFC’s closest publicly traded rival — complete with Hazy and his clout — and could help value AIG’s lessor. [ID:N15274621]

INDUSTRY SHIFT

Aircraft leasing — together with the broader airline industry and the global economy it is closely tied to — was hurt by the financial crisis, but has recovered, benefiting from growing air travel globally and the willingness of banks to lend money once again.

Since the crisis, however, the industry has seen a shift from behemoth companies with deep-pocketed parents such as ILFC and General Electric Co’s (GE.N), Gecas, toward smaller, more flexible lessors with the newer aircraft coveted by airlines as they seek fuel efficiency.

Air Lease aims to be such a company, but it also comes at a generous premium to peers AerCap Holdings NV (AER.N), Aircastle Ltd (AYR.N) and Fly Leasing Ltd (FLY.N) — at roughly 80 percent, or 1.5 times book value, according to IFR, a Thomson Reuters service.

The company has some 160 aircraft on order from Boeing Co (BA.N) and EADS (EAD.PA) unit Airbus, 10 of which are used.

Hazy and his team have invested millions in Air Lease and he will retain a 5 percent stake after the IPO.

Leonard Green’s fund and Ares Management are expected to keep stakes of almost 8 percent each, 7 percent will stay with the Commonwealth Bank of Australia and Wilbur Ross is expected to have almost 5 percent after the offering.

Hazy is widely credited with founding the entire aircraft leasing industry and, during his tenure at ILFC, being able to effectively tell Boeing and Airbus what planes to build. He is so deeply embedded in the industry, he once took his wife on a date to the airport and now has a Smithsonian air and space museum in Virginia named after him.

Air Lease shares are expected to begin trading on the New York Stock Exchange on Tuesday under the symbol “AL” (AL.N) JPMorgan and Credit Suisse led underwriters on the IPO. (Reporting by Alina Selyukh; editing by Andre Grenon, Gary Hill)