'Macquarie eyes $6 billion RBS aircraft-leasing unit'

The first round bids are due this week and the sale is attracting interest from other Asian players, two sources familiar with the matter revealed, with Macquarie expected to team up with another bidder.

Though a far cry from standard security underwriting, advisory work and lending, financial institutions like Macquarie have tacked on aircraft-leasing to their business operations, attracted by steady cash flows and returns.

Macquarie became a serious player in the industry only last year when it bought 53 passenger jets from AIG for close to $2 billion.

RBS Aviation is one of the world's top five commercial airline leasing firms - it owns, manages or has orders for 466 aircraft - and could fetch between $6 billion and $8 billion, industry sources and analysts have said.

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

"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," said Angus Gluskie, chief investment officer at White Funds Management in Sydney.

"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."

Reuters reported in July that RBS excluded the former boss of its aircraft leasing business from the auction, raising concerns the part-nationalised bank is barring a credible bidder and could short-change the UK taxpayer.

Sources at the time said Dublin-based aircraft leasing firm Avolon, which is run by Domhnal Slattery, the founder and former CEO of RBS Aviation, has been barred from the process.

The July Reuters report said private equity firm Terra Firma, owner of rival leasing firm AWAS, and GE Capital Aviation Services were among the possible suitors.

Bank of China's name has been connected to the sale as well. Bank of China owns aviation leasing and financing unit BOC Aviation, which it bought for $3.2 billion in 2006 and owns about 40 aircraft.