International Lease Finance Corp. said last week it could face additional writedowns on its aircraft fleet after revealing the results of stress tests on a portfolio that has already suffered more than $3 billion in charges over the past two years. It’s the first time that ILFC has revealed the bank-style stress tests of a potential downturn in its business, and comes ahead of the planned IPO. ILFC took $1.6 billion in charges last year against 100 aircraft from a fleet of almost 939 owned aircraft, and revealed the potential for more in a regulatory filing. However, new methodology employed since year-end would have reduced the number of planes affected last year to 95.
The Los Angeles-based company said changing cash flow assumptions used to calculate last year's charges could ensnare up to 114 more planes with a net book value of $2.1 billion, assuming cash flow estimates fall 20% short. Much of this could translate into a charge as impaired aircraft are generally only worth the sale price of their engines and spare parts.
ILFC's charges -- and the prospect of more -- come as the leasing sector deals with the fallout from a spate of airline collapses this year. The company said four customers had stopped flying or filed for court protection in 2012, returning 42 planes to ILFC's fleet of around 1,000 aircraft.
ILFC had a net book value of $7.5 billion as of Dec. 31, while its aircraft fleet had a book value of $35.6 billion. The aircraft charges left ILFC with a net loss of $723.9 million last year, compared with $495.7 million a year earlier.
The planned offering of shares in a new company, ILFC Holdings Inc., on the New York Stock Exchange is being managed by Citigroup Inc., J.P. Morgan Chase & Co. and Morgan Stanley, according to a regulatory filing.
ILFC could face additional writedowns
