Macquarie to acquire a portfolio of aircraft from AIG's International Lease Finance Corp.

Macquarie Group Limited (ASX: MQG, ADR: MQBKY) today announced that Macquarie Bank Limited (MBL) has entered into an agreement to acquire an aircraft operating lease portfolio from International Lease Finance Corporation (ILFC), a subsidiary of American International Group, Inc. (AIG).

Of the 53 aircraft that MBL has agreed to acquire from ILFC, MBL will acquire 47 aircraft for $US1,671 million (net of current cash deposits and subject to adjustments). The purchase will be funded from existing cash reserves. In connection with the transaction, MBL will transfer to Macquarie AirFinance Limited (MAF), a global aircraft leasing company of which Macquarie owns 37.5%, MBL's right to purchase six of the 53 aircraft directly from ILFC on similar terms to MBL.

The portfolio of 47 aircraft comprises young, modern aircraft on lease to 35 airlines in 27 countries. The weighted average age of the fleet is less than 4 years and the average remaining lease term is more than 5 years. Boeing 737 Next Generation and Airbus A320 Family aircraft make up more than 70% of the portfolio. The remainder of the portfolio are in-production widebody aircraft, well suited to the operating lease market. Macquarie considers the credit quality of the lessees to be above average for an aircraft operating lease portfolio.

The acquisition builds on Macquarie's existing leasing business in the aircraft sector and Macquarie's substantial experience in the leasing of assets through its Corporate and Asset Finance division (CAF) which has loans and leases under management of $A13.8 billion, as at 31 December 2009 across a range of industry sectors.

Macquarie Group Chief Financial Officer, Greg Ward, said: "This transaction leverages Macquarie's existing expertise in asset leasing, demonstrates the strength of our aircraft management capabilities and diversifies the client base of our aircraft fleet."

Macquarie's existing aircraft leasing business include:

• Macquarie Asset Leasing Trust, a wholly owned aircraft leasing vehicle established in 2005 which owns nine aircraft on lease to a major Australian airline; and
• MAF, a global aircraft leasing company which in 2006 purchased GATX Air, the aircraft leasing business of the GATX Corporation, and which prior to this transaction owns or manages 124 jet aircraft leased to 57 operators in 30 countries, across 6 continents.

Transaction terms and timing

MBL has agreed to acquire 53 aircraft from ILFC, but will transfer the purchase rights on six of these aircraft to MAF. The purchase price gross of current cash deposits (subject to adjustments) for the 53 aircraft under the agreement is $US1,987 million.

Completion of the transaction is expected to occur over the remainder of calendar 2010, subject to customary closing conditions. The impact on Macquarie's regulatory capital surplus as a result of the transaction is not expected to be material.