New China Trust Co., which led a Chinese investor group in a $4.2 billion bid for American International Group Inc. (AIG)’s aircraft-leasing unit, pulled out of the deal on concern its ties with a Chinese regulator would prompt added scrutiny, said people with knowledge of the matter.
New China Trust left the investor group in late May, said one of the people, who asked not to be identified as the process is private. The consortium has missed three deadlines to complete the purchase of International Lease Finance Corp. and AIG retains an option to terminate the deal, a person with knowledge of the matter said this month.
The exit of the Chongqing-based investment company has made it more difficult for the bidding group to finance the purchase because it prompted other Chinese investors to pull out as well, one of the people said. The consortium, now led by Hong Kong-based P3 Investments Ltd., has raised about $2.6 billion from five investors in Hong Kong and two in Taiwan, the person said.
The National Development and Reform Commission, China’s top economic planning agency, owned a stake in New China Trust’s majority shareholder until last year, company filings show. The NDRC had signaled to the bidding group that New China Trust’s presence might give the impression of a conflict of interest because the regulator approves all major overseas acquisitions, two of the people said.
Tim Payne, an external spokesman for the bidding group, declined to comment, as did AIG’s Jon Diat. Two calls to the NDRC’s press office went unanswered. A call made to New China Trust’s office in Chongqing wasn’t picked up.
New China Trust’s withdrawal came about two months after China’s Communist Party appointed Xu Shaoshi as chairman of the NDRC. The party expelled former NDRC Vice Chairman Liu Tienan this month on bribery charges, as President Xi Jinping has vowed to crack down on official corruption.
AIG said in June that it received a delayed deposit for the ILFC purchase. Its December agreement with the Chinese group for an 80 percent stake in ILFC required a 10 percent deposit. The unit owned or operated a fleet of about 1,000 aircraft as of March 31, according to a regulatory filing.
New China Trust is 71.9 percent owned by New Industries Investments, its 2012 annual report shows. The NDRC held a 7.3 percent stake in New Industries in 1998, according to a filing with the government of Shenzhen, where New Industries is based. The regulator sold its remaining shares in July 2012, a separate filing by New Industries shows.
Weng Xianding, New China Trust’s chairman, was the deputy head of the finance department of the NDRC’s predecessor in the late 1980s, according a biography posted on a Chinese forum he attended last year. In 1993, the agency asked him to start New Industries, the biography shows. Weng is also chairman of New Industries, according to a Shenzhen government database.
ILFC has been one of the hardest assets to sell since 2008 when AIG began divesting units to repay a U.S. bailout. The insurer said in 2011 that it could cut its stake through an initial public offering, and Chief Executive Officer Robert Benmosche said June 4 that an IPO was an option if the China deal collapsed.
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