Wednesday, March 25, 2009

IFLC Ready to be Raided on the Cheap

AIG is desperate to shed assets, especially their aircraft leasing division. IFLC is being looked over by Thomas H. Lee Partners, Carlyle Group, and Greenbriar Equity Group LLC and Onex Corp.

How cheap can it go? Without financing IFLC could issue the dreaded going concern warning. That smacked IFLC's credit default swaps. How much does it cost to "insure" $10 million of their debt?

It takes an upfront payment of $3.35 million and $500,000 a year. Ten year coverage would cost $8.35 million or 83.5% of the principal. That's expensive coverage.

All this should drive the price of IFLC down to where Carlyle and company can make their 30% annual return target. The question is the taxpayer subsidy. How much will be direct vs. indirect in the private auction?

The Carlyle Group likes the insurance sector. They are in talks with Innovation Group PLC, an insurance software and outsourcing firm.