UPDATE 3-Chinese group in talks to buy AIG air lease arm-source
* Bid by Chinese consortium to value ILFC at about $5.5 billion
Consortium includes Chinese bank ICBC
* ILFC has been expanding in Asia since beginning of 2012
* ILFC had total assets worth $39.6 billion in third quarter
By Michael Flaherty and Denny Thomas
HONG KONG, Dec 7 (Reuters) - A group of Chinese companies, including the Industrial and Commercial Bank of China (ICBC), is in talks to buy American International Group Inc's aircraft leasing unit for about $5.5 billion, a source familiar with the matter said on Friday.
AIG, which has been selling assets to pay back a $182 billion U.S. government bailout from 2008, had long been hoping to float its ILFC unit through an initial public offering, but poor market conditions forced it to delay the plans.
An IPO was expected to value the company at $6 billion to $8 billion, according to previous reports on the plans.
AIG Chief Executive Officer Robert Benmosche said last month that he was waiting for markets to improve to take the company public.
But a Chinese consortium has stepped in to buy the leasing company, said the source, who was not authorized to speak publicly about the matter.
"The talks are reasonably far along," said the source, adding that the purchase price has not been fully determined and depended on various factors.
In addition to ICBC , China's largest bank, the bidding group includes trust company New China Trust and China Aviation Industry Fund, the source said. New China Trust is 20 percent owned by British bank Barclays Plc.
According to AIG's third-quarter earnings report, ILFC's net book value as of Sept. 30 was $7.9 billion. In the past, Benmosche had been adamant about not selling ILFC for less than book value, although the fact that the IPO process has languished for 15 months may have changed his thinking.
The filing says ILFC had total assets of $39.6 billion and reported $39 million in operating income in the third quarter, compared to an operating loss of $1.3 billion a year earlier, when it took $1.5 billion of impairment charges and fair value adjustments.
Founded by leasing legend Steven Udvar-Hazy, who sold the company to AIG and eventually formed his own group, ILFC is one of the world's largest leasing companies and among the world's biggest owners of passenger jets. Its main rival is GECAS, the aviation leasing arm of General Electric.
ILFC's customers include most of the world's major airlines including American Airlines, Emirates and Air France.
Since it was founded almost 40 years ago, ILFC has bought a combined total of more than 1,500 passenger jets from Boeing Co and Airbus, according to manufacturer figures.
ILFC has a current portfolio of more than 1,000 owned or managed aircraft, and another 239 new fuel-efficient aircraft, including Boeing 787s and Airbus A320neos, on order. It also has the rights to purchase an additional 50 such aircraft.
The leasing company has been looking for areas of growth and beefed up its presence in the Asia Pacific region by opening offices in Singapore and Beijing this year.
CHINESE BUYING SPREE
China has shown interest in buying aircraft leasing businesses before.
China Development Bank, the country's policy lender, was among the short-listed bidders for Royal Bank of Scotland Group Plc's aviation business earlier this year, according to a previous Reuters report.
That business was bought by a consortium led by Japan's Sumitomo Mitsui Financial Group.
Chinese companies have launched about $51.3 billion worth of overseas acquisitions this year, making the country Asia's second-biggest spender on outbound transactions, according to Thomson Reuters data, behind Japan.
Bloomberg was first to report the news of the Chinese consortium's plans to buy ILFC.
Spokesmen for AIG and ICBC declined to comment. Reuters was unable to reach New China Trust and China Aviation.