Credit researcher says ILFC debt is a buy

Credit research firm KDP Advisor recommends buying AIG subsidiary ILFC’s $1.5 billion outstanding of 8.75% senior notes, and its $750 million outstanding of five-year Libor plus 475 basis points term loans in a new research report.

KDP says that ILFC’s anticipated increased cashflow from reduced purchase commitments and asset sales over the next two years means it will be able to reduce its debt by 25%, around $7.5 million.

In February, ILFC issued $1.3 billion in term loans, followed by a $2 billion 9% senior note issue in March. This month, the company agreed to sell $2 billion of aircraft, and it agreed with lenders holding $2.155 billion of its $2.5 billion 2006 credit facility to extend the maturity of the loan by one year, to 2012.

“These transactions, combined with expected free cash flow ... will total $8.35 billion of incremental liquidity and comfortably cover ILFC’s 2010 maturities of $6.6 billion,” writes KDP in the note.

The credit researcher expects ILFC to issue an additional $1 billion – $1.5 billion of unsecured notes next year.