(Reuters) - American International Group Inc ( AIG.N ) is to sell nearly all of ILFC ( ILFC.N ), the world's second-largest airplane leasing business, to a Chinese consortium for up to $4.8 billion, giving the fastest growing aviation market easier and cheaper access to planes.
Chinese firms have shown interest in aircraft leasing before, and the deal would give China access to a global network of about 200 airlines in 80 countries. China is alreadyILFC's largest market with180 planes operating there, giving it 35 percentmarket share.
"It's the biggest deal we have in the aircraft leasingworld and it's very ambitious," said Paul Sheridan, head of Asia at aviation consultancy firm Ascend Advisor. "We believe there are not enough aircraft on order in China at the moment. Itwill help Chinese airlines get more aircraft."
The world's two largest planemakers - Airbus, owned by aerospace group EADS ( EAD.PA ), and U.S. rival Boeing ( BA.N ) - have predicted demand for $4.5 trillion worth of passenger jets over the next two decades, with about two-thirds of new planes sold in the Asia-Pacific region, and China as the biggest single market in value terms.
Analysts say China tends to balance its orders between Airbus and Boeing, partly for political reasons. This means China pays an effective premiumfor planes as the two manufacturers don't have to compete as heavily for orders as they do elsewhere. ILFC's order books could mean cheaper planes for China, industry experts say.
U.S. REVIEW
U.S. insurer AIG, which had said on Friday it was in talks about a sale of the business to Chinese buyers, said it will submit the offer for review by theU.S. Committee on ForeignInvestment, or CFIUS, which vets foreign deals for security concerns.
Chinese state-backed investments in some sectors have stirred a political backlash, but aircraft leasing is seen as less sensitive than investment in minerals or telecoms equipment."ILFC's portfolio is not heavily in the U.S. It's an American-owned asset, but a lot of their aircraft fly outside the U.S," said Ascend's Sheridan, adding he did not expectthe U.S. government agency to block the deal.
AIG received a $182 billion U.S. government bail-out following the global financial crisis, and has been selling off the bulk of its Asian operations as part of a wider divestment plan so it can repay the government. In September, the U.S. Treasury cut its AIG stake to below 16 percent of the outstanding shares from around 53.4 percent.
CHINA BUSY BUYERS
The Chinese consortium - made up of New China Trust, which is one-fifth owned by Barclays Plc ( BARC.L ), China Aviation Industrial Fund and P3 Investments Ltd, and advised by Credit Suisse ( CSGN.VX ) - will buy 80.1 percent of ILFC for $4.23 billion, with the option to buy another 9.9 percent. An arm of Industrial and Commercial Bank of China( 1398.HK ), China's biggestbank, will join once the deal has regulatory approval.
P3 Investments is led by Wing-Fai Ng, co-founder of the now defunct pan-Asia fund Primus Financial Holdings.
Founded by aircraft leasing legend Steven Udvar-Hazy, who sold thecompany to AIG in 1990, ILFC is among the world'sbiggest owners of passenger jets. Its main rival is GECAS, an arm of General Electric Co ( GE.N ).
The deal reinforces China's appetite for outbound mergers and acquisitions, taking the country's 2012 tally to$56.8 billion, according toThomson Reuters data, thebiggest dealmaking spree since 2008.
In the past few days alone, Canada agreed to allow CNOOC ( 0883.HK ) to buy domestic energy company Nexen Inc ( NXY.TO ) for $15.1 billion, and China's privately-owned Wanxiang Group won a politically sensitive auction for bankrupt electric car battery markerA123 Systems Inc ( AONEQ.PK ), partly funded by the U.S. government.
WEAK MARKETS SAW OFFIPO
AIG had long wanted to float ILFC in the United States as part of a wider program to raise money topay back the U.S. government, but poor market conditions shelvedthose plans.
The sale would leave AIGwith a $6.4 billion stake inits former Asian life insurance unit AIA Group Ltd ( 1299.HK ), which is widely expected to be sold.
AIG said it would record a non-operating loss of$4.4 billion on the ILFC sale, including a charge for tax-related items. The deal, expected to close in the 2013 second quarter, values the leasing business at $5.28 billion, below its end-third quarter book value of$7.9 billion.
"Upon completion, the transaction will have a positive impact on AIG`s liquidity and credit profileand will enable us to continue to focus on our core insurance businesses," AIG CEO Robert Benmosche said in a statement.
AIG agreed to buy a $500million stake in Chinese insurer PICC Group ( 1339.HK ), which made its debut on the Hong Kong stock exchange last week.
ILFC will retain its currentmanagement and continue to be based in Los Angeles. It will appoint a new board with a majority of U.S. and European representatives, AIG said.
Monday, 10 December 2012
Saturday, 8 December 2012
HSBC to pay $1.5bnin fines to US to settle money-laundering investigations .
HSBC is expected to pay more than $1.5bn (£933m) in fines to US authorities within weeks to settle money-laundering investigations into its business.
The bank could be fined the sum as early as next week as part of a settlementwith federal prosecutors, according to reports yesterday.
HSBC has put aside $1.5bn to meet the cost of the fines, but admitted at its latest results presentation that the eventual penalty could be “significantly higher” and that it could face criminal charges. Yesterday’s reports put the likely size of the fine at$1.8bn. HSBC declined to comment.
The fines relate to an investigation of HSBC’s US and Mexican operations that found the bank had allegedly ignored warningsthat billions of dollars of funds being moved between the two subsidiaries were linked to drug trafficking.
A Senate committee described the bank as “pervasively polluted for a long time”. It highlighted what it said were lax controls and inadequate compliance by staff as the bank was accused of handling transactions involving terrorists, drug lords and rogue regimes.
David Bagley, HSBC’s global head of compliance, resigned over the scandal, while Stuart Gulliver, the bank’s chief executive, apologised for “the mistakesof the past”.
A settlement would likely involve the US Department of Justice agreeing a deal whereby HSBC paid a largefine, but in return would have the prospect of a further criminal action dropped so long as it reformed compliance systems.
But there is no certainty of this type of settlement. Announcing its third-quarter results last month, HSBC said: “While the prosecution of corporate criminal charges in these types of cases has most often been deferred through an agreement withthe relevant authorities, theUS authorities have substantial discretion, and prior settlements can provide no assurance as to how the US authorities will proceed in these matters.”
A fine of $1.8bn would be one of the biggest financial penalties imposed on a British bank, but would notprevent HSBC from reporting a profit for 2012.
The bank is in the process of radically restructuring itsUS operations and is preparing to sell down some of the more than$40bn of toxic US debt it still holds on its books morethan four years on from thefinancial crisis.
The bank could be fined the sum as early as next week as part of a settlementwith federal prosecutors, according to reports yesterday.
HSBC has put aside $1.5bn to meet the cost of the fines, but admitted at its latest results presentation that the eventual penalty could be “significantly higher” and that it could face criminal charges. Yesterday’s reports put the likely size of the fine at$1.8bn. HSBC declined to comment.
The fines relate to an investigation of HSBC’s US and Mexican operations that found the bank had allegedly ignored warningsthat billions of dollars of funds being moved between the two subsidiaries were linked to drug trafficking.
A Senate committee described the bank as “pervasively polluted for a long time”. It highlighted what it said were lax controls and inadequate compliance by staff as the bank was accused of handling transactions involving terrorists, drug lords and rogue regimes.
David Bagley, HSBC’s global head of compliance, resigned over the scandal, while Stuart Gulliver, the bank’s chief executive, apologised for “the mistakesof the past”.
A settlement would likely involve the US Department of Justice agreeing a deal whereby HSBC paid a largefine, but in return would have the prospect of a further criminal action dropped so long as it reformed compliance systems.
But there is no certainty of this type of settlement. Announcing its third-quarter results last month, HSBC said: “While the prosecution of corporate criminal charges in these types of cases has most often been deferred through an agreement withthe relevant authorities, theUS authorities have substantial discretion, and prior settlements can provide no assurance as to how the US authorities will proceed in these matters.”
A fine of $1.8bn would be one of the biggest financial penalties imposed on a British bank, but would notprevent HSBC from reporting a profit for 2012.
The bank is in the process of radically restructuring itsUS operations and is preparing to sell down some of the more than$40bn of toxic US debt it still holds on its books morethan four years on from thefinancial crisis.
Friday, 7 December 2012
China National Offshore Oil Corporation in acquisition of Nexen
Canada on Friday allowed a Chinese state-run oil giant to move forward with $15 billion takeover of a domestic energy company, but the government indicated that such deals might not pass muster in the future.
The deal - the acquisition of Nexen by the China National Offshore Oil Corporation, or Cnooc - is the latest effort by the Chinese government to find new sources of oil and natural gas reserves to helpdrive the country's growth.The state-run Cnooc has been active, striking severalpartnerships in Canada andthe United States.
Canada, in part, has welcomed the alliances.
Prime Minister Stephen Harper has been trying to create new markets to export Canadian energy, which is largely dependenton the United States for its exports. He has been courting China since the United States stalled approval of the Keystone XL pipeline project, which would move more oil sandsproduction to the Gulf Coast. On Friday, the governmentalso approved a $5 billion acquisition of Progress Energy Resources of Canada by Petronas, the Malaysian state-owned oil and gas company.
But the Nexen deal has also reignited the controversy over strategic assets ending up in the hands of foreign owners. Seven years ago, Cnooc gave up on an $18.5 billionbid for Unocal of the United States after political opposition. Two years ago, Sinochem, a Chinese chemicals maker, backed away from buying the Potash Corporation of Saskatchewan for similar reasons.
The Nexen bid prompted nationalistic concerns in Canada. Some conservative members of Parliament worried about Cnooc, which is an arm of the Chinese government, gaining control over energy assets generally controlled by Canadian provinces. Recognizing the sensitivity of the deal, Mr. Harper noted that foreign investment rules would be changed to block companies owned by foreign governments from acquiring properties in Alberta oil sands in all but"exceptional" circumstances.
"Canadians generally, and investors specifically, should understand that these decisions are not the beginning of a trend, but rather the end of a trend," Mr. Harper said at a news conference. "When we say that Canada is open for business, we do not mean that Canada is for sale to foreign governments."
It is not clear how the directive will play out on the deal-making front.
The deal - the acquisition of Nexen by the China National Offshore Oil Corporation, or Cnooc - is the latest effort by the Chinese government to find new sources of oil and natural gas reserves to helpdrive the country's growth.The state-run Cnooc has been active, striking severalpartnerships in Canada andthe United States.
Canada, in part, has welcomed the alliances.
Prime Minister Stephen Harper has been trying to create new markets to export Canadian energy, which is largely dependenton the United States for its exports. He has been courting China since the United States stalled approval of the Keystone XL pipeline project, which would move more oil sandsproduction to the Gulf Coast. On Friday, the governmentalso approved a $5 billion acquisition of Progress Energy Resources of Canada by Petronas, the Malaysian state-owned oil and gas company.
But the Nexen deal has also reignited the controversy over strategic assets ending up in the hands of foreign owners. Seven years ago, Cnooc gave up on an $18.5 billionbid for Unocal of the United States after political opposition. Two years ago, Sinochem, a Chinese chemicals maker, backed away from buying the Potash Corporation of Saskatchewan for similar reasons.
The Nexen bid prompted nationalistic concerns in Canada. Some conservative members of Parliament worried about Cnooc, which is an arm of the Chinese government, gaining control over energy assets generally controlled by Canadian provinces. Recognizing the sensitivity of the deal, Mr. Harper noted that foreign investment rules would be changed to block companies owned by foreign governments from acquiring properties in Alberta oil sands in all but"exceptional" circumstances.
"Canadians generally, and investors specifically, should understand that these decisions are not the beginning of a trend, but rather the end of a trend," Mr. Harper said at a news conference. "When we say that Canada is open for business, we do not mean that Canada is for sale to foreign governments."
It is not clear how the directive will play out on the deal-making front.
Index
A statistical measure of the state of the stock market, based on the performance of stocks. Examples are the S&P/TSX Composite Index and the S&P/TSX Venture Composite Index.
Income Trust
Also called income funds. Income trusts are trusts structured to own debt and equity of an underlying entity, which carries on an active business, or has royalty revenues generated by the assets of an active business. By owning securities or assets of an underlying business, an income trust is structured to distribute cash flows, typically on a monthly basis,from those businesses to unit holders in a tax-efficient manner. The trust structure is typically utilized by mature, stable, sustainable, cash-generatingbusinesses that require a limited amount of maintenance capital expenditures. An income trust is an exchange-traded equity investment that is similar to a common share.
There are four categories of income trusts: business trusts; real estate investmenttrusts (REITs); energy trusts; and power, pipeline, and utility trusts.
There are four categories of income trusts: business trusts; real estate investmenttrusts (REITs); energy trusts; and power, pipeline, and utility trusts.
Income Deposit Security (IDS)
An exchange-traded, fixed income-like instrument consisting of a subordinateddebt security and a share of common stock packaged together to form a tax-efficient delivery mechanism to distribute an issuer's free cash flow to its investors. Investors are paid dividends from the commonshare component and interest from the subordinated debt. The structure was created for U.S.-based companies to replicate the economic attributes of the Canadian income trust structure - providing steady, high-yield returns to U.S. and Canadian investors in U.S. companies. IDSs do not use the trust structure. Also known as income participating securities (IPS).
Improving the Market
An order that either raises the bid price or lowers the offering price is said to be improving the market. The market improves because the spread between the bidand offer decreases.
If, As & When Issued Trading
Occurs when new securities are posted for trading, and trading takes place before the closing (formal original issuance) of the prospectus. Also known as the "grey market". The term is used only for listing of new securities, either on a listing of a new issuer, a supplemental listing, or an additional listing of existing listed securities. Settlement occurs on the closing of the prospectus. The time from posting for trading to closing is generally within a week.
Indicative Calculated Closing Price (ICCP)
A feature of Market On Close (MOC), a TSX electronic call market facility, the Indicative Calculated Closing Price (ICCP) provides a preliminary indication of what the calculated closing price for a MOC security would be assuming the regular trading session had ended at the time of calculation. The ICCP is calculated without referenceto volatility parameters. The ICCP for each MOC security will be broadcast to the trading community at 3:50 PM ET on each trading day, 10 minutes prior to the actual Market On Close execution. A key objective of broadcasting the ICCP is to provide market participants with an early indication of potentially large price movements at the close. The ICCP for all MOC securities will be included in the MOC Imbalance
Inflation
An overall increase in pricesfor goods and services, usually measured by the percentage change in the Consumer Price Index.
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