Is the ILFC sale about to fold?

The sale of American International Group's (AIG) leasing arm to a Chinese consortium is hanging in the balance after its deadline was extended for the third time.

The $4.8bn deal to buy up to 90 per cent of International Lease Finance Corp (ILFC) was due to close in May this year. However, New China Trust, which was leading the consortium of investors, reportedly backed out of the deal in the same month.

The consortium's two other investors, P3 Investments and China Aviation Industrial Fund, are said to still be in talks with AIG but there's no word on a replacement third investor.

But surely one of the world's leading aviation lessors, ILFC, must have many suitors? Well, yes and no.

ILFC is a vast company but it's for this reason that AIG is looking to off-load it (that and because it's not part of its core business). Similarly, it's really too big for a single new investor to acquire.

Additionally, despite its value, ILFC had to write down a number of its older aircraft that had become obsolete (largely due to the cost of fuel) and it now sits on a lot of debt.

When AIG first attempted to sell off ILFC four years ago, it valued the company at $8bn – almost double the $4.8bn it had agreed with the Chinese consortium. Now that the market's picked up, AIG is likely to make more money by selling AIG shares through an initial public offering (IPO), something its CEO, Bob Benmosche, has said the company is willing to do.

In fact, due to the missed deadline, AIG is now free to look for another buyer, or to arrange an IPO. So why is it holding off? Partly, perhaps, because it wants to make ties with China, or perhaps because it's a case of "better the devil you know". Either way, it seems willing to make allowances for the consortium - just not too many.

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