Macquarie may join bidding war for RBS’s $8bn aircraft leasing arm

Macquarie Group is eyeing a bid for the aircraft-leasing business being sold by the Royal Bank of Scotland as Australia’s top investment bank seeks to expand its growing reach into aviation assets.

RBS is looking to raise between $6 billion (£3.6bn) and $8bn from the sale of its Aviation Capital division and Macquarie has joined a queue of firms thought to be preparing bids. They include Bank of China, General Electric and private equity firm Terra Firma. The first-round bids are due this week and the sale is attracting interest from other Asian players, with Macquarie expected to team up with another bidder.

RBS first put the aircraft leasing unit up for sale in 2009, following the state bail-out that left it 83 per cent owned by the taxpayer. However, a planned auction was cancelled as the recession hit the aviation industry and dampened buyers’ appetite for the business.

RBS Aviation Capital is one of the world’s top five commercial airline leasing firms – it owns, manages or has orders for 466 aircraft.

Macquarie became a serious player in aircraft leasing only last year when it bought 53 passenger jets from AIG for close to $2bn.

It is understood it had looked at a number of options including making a direct offer for the whole of the RBS-owned business, parts of the business or putting together a consortium to bid for the assets. It is thought a successful bid could make the Australian investment bank the world’s third-largest plane lessor.

Among rival bidders, Bank of China owns aviation leasing and financing unit BOC Aviation, which it bought for $3.2bn in 2006 and owns about 40 aircraft.

Other interested Asian firms are thought to include Japan’s Mitsubishi and Marubeni Trading Co. It is thought that Dublin-based aircraft leasing firm Avolon, which is run by Domhnal Slattery, the founder and former chief executive of RBS Aviation, was barred from the process in July.

The RBS Aviation sale has come to market as US insurer AIG prepares to spin off its much larger ILFC leasing unit. A spokeswoman for RBS said: “The sale process for RBS Aviation Capital is under way following significant expressions of interest from potential bidders in the business in recent months.

“RBS Aviation Capital’s management team has delivered strong business and financial performance over the past decade and it remains among the top four commercial aircraft lessors by fleet value with one of the youngest fleets of narrow bodied aircraft globally. We will not be commenting further during the sales process.”

Investors cautioned that Macquarie should be disciplined in the bid to sustain the healthy returns the division is currently earning.

Angus Gluskie, chief investment officer at White Funds Management in Sydney, said: “Macquarie went and bought aircraft-leasing assets on the cheap just after the global financial crisis and that is why that business had done really well.

“The key question is what is the pricing going to be and will that pricing allow satisfactory returns? And remember credit conditions are tightening and the price of the asset a month or two later may be well below what it is now.”