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China sovereign fund seeks partner for AIG's ILFC

(Agencies)
Updated: 2009-02-17 17:04

China Investment Corp (CIC), a $200 billion sovereign wealth fund, is in talks with local banks to jointly bid for American International Group Inc's $8 billion aircraft leasing unit, sources with knowledge of the situation said on Tuesday.

Related readings:  Sovereign fund eyes stake in CITIC arm   China's sovereign fund in 'no hurry to invest overseas'  CIC raises stake in Blackstone to 12.5%

In the last couple of months, CIC has approached at least two of China's biggest lenders - Industrial and Commercial Bank of China (ICBC) and Bank of China - to discuss the possibility of jointly bidding for International Lease Finance Corp (ILFC), the sources said.

ILFC needs a buyer with access to cheap capital and a large balance sheet so it can finance the purchase of aircraft before leasing them out.

ICBC is the world's biggest commercial bank by market value, while Bank of China, the country's top foreign exchange lender, is China's most international bank in terms of overseas network.

Bank of China already owns Asia's largest aircraft leasing business, the Singapore-based BOC Aviation.

"ILFC is too big for just one fund or company to buy and it is not too cheap either," said one of the sources.

"CIC has the money but it will be happier to team up with a Chinese bank that knows the business, making the deal more likely a strategic investment to ILFC," he added.

The sources declined to be identified due to the sensitive nature of the deal.

AIG is selling assets, including ILFC, to repay the US government after it was bailed out last year.

ILFC, the biggest customer for Boeing's new 787 Dreamliner, is widely regarded as an attractive asset although few buyers are in a position to make such a big outlay.

Initial bidders for ILFC included private equity firms Carlyle Group CYL and Kohlberg Kravis Roberts & Co, as well as sovereign wealth funds Temasek Holdings, Istithmar World, Kuwait Investment Authority and CIC, Reuters reported last month.

A second round of bids is set for late this month, with would-be buyers expected to form bid consortia, sources have told Reuters.

Representatives for CIC and ILFC could not be immediately reached for comment, while officials in charge of financial leasing businesses at Bank of China and ICBC declined to comment.