AIG to Spin-off Plane-Leasing Subsidiary (AIG, BA, GE, EADSY, UTX, BAC, C, JPM, MS)

American International Group, Inc. (NYSE: AIG) has filed a registration Form S-1 for a proposed initial public offering of its wholly-owned IFLC Holdings, Inc. subsidiary. IFLC is the aircraft leasing unit of AIG and does business with Boeing Co. (NYSE: BA), General Electric Co. (NYSE: GE), European Aeronautic Defence and Space Co. (OTC: EADSY), and the Pratt & Whitney engine subsidiary of United Technologies Corp. (NYSE: UTX).

The filing does not include the number of shares to be offered, the offering price, or the timing of the IPO, but AIG is expected to sell about 20% of ILFC initially with more than 80% of the company’s stock expected to be floated within three years of the IPO. The proposed IPO could place the company’s value at $8-$10 billion.

AIG has tried to sell all or part of ILFC following its takeover by the federal government, but no buyer was found. The company’s fleet numbers more than 900 planes and it has orders for an additional 236 for delivery by 2019.

AIG has said that proceeds from the IPO will be used to repay more of the remaining $65 billion it owes the US government.

The Wall Street Journal noted an interesting wrinkle in today’s filing.  Bank of America Corp. (NYSE: BAC) and Merrill Lynch are not included among the underwriters. The filing names Citigroup Inc. (NYSE: C), JP Morgan Chase & Co. (NYSE: JPM), and Morgan Stanley (NYSE: MS) as underwriters. BofA Merrill Lynch had been thought to be among the original proposed underwriters, but it has been replace by Morgan Stanley.

Could the US Treasury Department have scotched BofA’s participation? That’s possible, given the bank’s recent struggles and government demands that BofA develop a contingency plan in case its condition gets worse. One possibility is that the bank would sell off Merrill Lynch, its most profitable business. Not very enticing to AIG’s federal masters.

AIG’s shares are down more than -2.5% in the first hour of trading this morning, at $24.14, in a 52-week range of $21.46-$62.87. BofA shares are down more than -6.25%, at $7.41, in a 52-week range of $6.01-$15.31.

Paul Ausick