NEW YORK (Reuters) – Private equity firms Onex Corp (OCX.TO) and Greenbriar Equity Group have ended their bid to buy a part of American International Group’s (AIG.N) aircraft leasing unit, a person familiar with the situation said on Tuesday.
The private equity group led by International Lease Finance Corp (ILFC) Chief Executive Steven Udvar-Hazy had offered to buy about 10 percent of the unit’s aircraft portfolio for roughly $4 billion.
AIG did not want to sell the assets to Udvar-Hazy, the founder of the unit, the source said.
Udvar-Hazy was last month replaced by Douglas Steenland, an AIG board member and former chief executive of Northwest Airlines, as chairman of ILFC.
Udvar-Hazy, who effectively invented the business of aircraft leasing when he started ILFC in 1973, might leave the firm, according to media reports. He built up and sold the company to AIG in 1990 for about $1.3 billion.
A second source familiar with the situation said the insurer is reviewing options for ILFC, including accessing capital markets through secured debt financing.
AIG and Onex declined to comment. Greenbriar could not immediately be reached for comment. The sources are anonymous because the talks were not public.
AIG, which was propped up by a $182.3 billion taxpayer-funded aid package, has tried to sell Los Angeles-based ILFC for more than a year as part of its efforts to pay back the government.
But a sale has proved to be a challenge due to the lessor’s mountain of debt and funding needs. ILFC had roughly $30 billion of total debt financing and subordinated debt as of Sept. 30.
On Monday, Standard & Poor’s cut its ratings on ILFC, saying that AIG may hold out for years before selling the company.
The rating agency cut ILFC’s corporate credit rating two steps to BBB-minus, the lowest investment grade, and cut its unsecured debt three steps to BB-plus, the highest junk rating.
AIG closed down 6.5 percent at $24.40 on the New York Stock Exchange. (Reporting by Paritosh Bansal; Editing by Gary Hill)