Royal Bank of Scotland Group PLC on Friday said it launched the sale of its airplane-leasing subsidiary, in a deal that analysts say could fetch up to $8 billion.
RBS Aviation Capital is the world's fifth-largest leasing company by fleet value, according to consultants Ascend Ltd. The operation is also likely to be one of the largest leasing companies put up for direct sale in the near future, industry officials have speculated.
RBS said in a statement that "the sale process for RBS Aviation Capital is under way following significant expressions of interest from potential bidders in the business in recent months."
The giant British bank will now begin distributing detailed information about its leasing unit to bidders that meet certain criteria. The timing of a final deal isn't set, and RBS could postpone the sale if it isn't satisfied with offers. RBS, which was taken over by the British government during the financial crisis in 2008, deemed its airplane-leasing unit noncore and in 2009 hired Goldman Sachs Group Inc. to assess options for a sale. The transaction wasn't immediately pursued due to market conditions.
Over recent months, the aviation and airplane-leasing industries world-wide have picked up significantly. On Wednesday, for example, AMR Corp.'s American Airlines announced a 460-plane order from Airbus and Boeing Co., and almost half of the planes could be leased, people involved in the deal said. Airbus is a unit of European Aeronautics Defence & Space Co.
U.S. insurance giant American International Group Inc., another financial institution that struggled during the financial crisis and was taken over by the U.S. government, is also now considering the sale of its airplane-leasing business, International Lease Finance Corp., according to people familiar with the talks. AIG is likely to sell part of ILFC through an initial public offering because the world's second-biggest airplane lessor is too big for a direct sale to an investment group or another lessor, these people said.
In April, Air Lease Corp., a new lessor started last year by ILFC founder and former chief executive Steven Udvar-Hazy, successfully listed on the New York Stock Exchange. That deal has sparked much greater investor interest in the sector, officials at several rival lessors have said.
RBS Aviation Capital owns and manages a fleet of roughly 250 jetliners, valued at around $8 billion. Despite its parent bank's problems, the unit has remained profitable over recent years, according to people familiar with the business, although RBS doesn't disclose the unit's financial data.
The lessor invests mainly in smaller jetliners, like Boeing 737s and Airbus A320s, which boast strong demand and are easily traded. As part of its strategy to maintain a young, competitive fleet, the company has profitably sold 170 airplanes from its books, it says.
"RBS Aviation Capital's management team has delivered strong business and financial performance over the past decade," the company said in its statement. The unit's chief executive, Peter Barrett, stepped into the role in 2004 and has more than 20 years of experience in airplane leasing.
RBS bought the business in May 2001, when it was a boutique Irish lessor called IAMG. IAMG's founder, Domhnal Slattery, persuaded RBS to invest and expand the unit following the terrorist attacks of Sept. 11, 2001, and the bet paid off as the aviation industry recovered. Mr. Slattery later left RBS and last year started a new lessor, Avolon, hiring away several staff members from the RBS operation.
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