NU Online News Service, March 25, 3:24 p.m. EDT
American International Group's plane leasing subsidiary, International Lease Finance Corporation, said its future existence could be in doubt if it is unable to secure funding from its troubled parent or a third-party lender.
In its annual statement filing, ILFC, which acquires new aircraft and leases them to airlines throughout the world, said it generally finances its aircraft purchases through available cash balances, internally generated funds and debt financings.
"A combination of the challenges facing our parent [AIG], the downgrades in our credit ratings or outlooks by the rating agencies, and the turmoil in the credit markets have eliminated our ability to issue commercial paper and public unsecured debt," the company explained.
ILFC also noted AIG is looking to divest it as part of its restructuring plan. Because of AIG's announced plans to sell ILFC, and due to the current credit markets, ILFC "may not be able to obtain secured financing from third parties on favorable terms, if at all," the company said.
ILFC said it borrowed $1.7 billion from AIG subsidiary AIG Funding Inc. in order to meet its third-quarter 2008 liquidity needs. It repaid that amount by issuing commercial paper under the New York Fed's Commercial Paper Funding Facility (CPFF). But ILFC lost its access to the CPFF after Standard & Poor's downgraded its long- and short-term credit ratings.
ILFC said on March 12 it borrowed $800 million from AIG Funding to pay its obligations through the end of this month, and AIG has approved an additional $900 million loan to fund obligations through April. That loan is subject to receiving consent of the New York Federal Reserve Bank, ILFC noted.
"Without additional support from AIG or obtaining secured financing from a third-party lender, in the future there could exist doubt concerning our ability to continue as a going concern," ILFC said.
If the company is unable to secure additional support, ILFC said it "will have to pursue alternative strategies, such as selling aircraft. If we are unable to raise sufficient cash from these strategies, we may be unable to meet our debt obligations as they become due."
© Arc, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to TMSalesOperations@arc-network.com. For more information visit Asset & Logo Licensing.