Jan 25, 2010
(WSJ) - Steven Udvar-Hazy
, the chief executive and a founder of aircraft-leasing company International Lease Finance Corp. (ILFC)—
who tried to extricate the firm from its struggling parent, American International Group Inc.—is expected to leave the company as soon as this week, people familiar with the matter said.
AIG has been trying to sell ILFC, one of the two biggest aircraft-leasing companies in the world, for the past year. The company may name John Plueger, currently ILFC's president and chief operating officer, to succeed Mr. Udvar-Hazy as chief executive, according to a person familiar with the matter. Discussions on the succession plan are continuing, said another individual.
Mr. Udvar-Hazy, who turns 64 years old in February, was succeeded last month as chairman of ILFC by Douglas Steenland, an AIG board member and the former president and CEO of Northwest Airlines. That change wasn't announced by ILFC or AIG. Mr. Udvar-Hazy didn't respond to a request for comment Sunday.
The giant insurer, which was bailed out by the government in September 2008, has been looking to sell ILFC or parts of it after deeming the firm a noncore business. It is unclear how Mr. Hazy's departure will affect AIG's effort to find buyers for ILFC, now relying on its parent for some financial support after being effectively frozen out from the public debt markets.
Mr. Udvar-Hazy was recently in talks to purchase about $4 billion in planes from the leasing firm, which had total assets of $46 billion as of September 2009. That plan, which had backing from private-equity firms Greenbriar Equity Group LLC and Onex Partners, was recently rejected, according to people familiar with the situation.
Mr. Udvar-Hazy co-founded ILFC in 1973 with two other individuals and grew it into one of the two largest aircraft leasing firms in the world, with nearly 1,000 Boeing and Airbus aircraft.
The appointment of Mr. Steenland as ILFC's nonexecutive chairman and the expected selection of an insider to succeed Mr. Udvar-Hazy in leading the business should be welcomed by the industry, according to one airline executive. ILFC ranks alongside the Gecas unit of General Electric Co. as the world's largest aircraft-leasing businesses, and uncertainty over its future and potential asset sales had threatened aircraft values as well as efforts by number of other companies to sell their own leasing operations.
Mr. Steenland is chairing an ILFC board committee that was recently created to oversee the proposed purchase of part of its plane fleet by the bidder group involving Mr. Udvar-Hazy, according to a person familiar with the matter. The idea was to make sure "the overall process for conducting an auction for a small slice of the fleet is done at arm's length," this person explained.
While ILFC remained profitable in the third quarter of 2009, its roughly $30 billion debt load and continuing lack of access to short-term capital markets have forced the company to rely on federal funds channeled through AIG to meet some financial obligations. Last month, Moody's Investors Service downgraded ILFC's credit rating to "junk" from "investment grade," citing liquidity constraints and waning support from parent AIG, which is committed to backstopping ILFC through November 2010.
ILFC's weaker credit rating could further hamstring the aircraft financing company's ability to raise money by issuing bonds and commercial paper. Over time, it may have to sell off some of its aircraft assets at a loss to repay maturing debt, Moody's said.