Hazy – Hot or Not?

By all accounts the Farnborough Air Show was a smash success. Over $40 billion in total orders. Even BA caught a bid on the news. No doubt the ‘bubbly’ is flowing. Of interest is that this group would be drinking seltzer water were it not for the efforts of one man. Steven Udvar-Hazy bought 25% of those planes.

Hazy has a great story. He took $150k of his own money, borrowed another mil and started ILFC. International Lease Finance is one of the most successful aircraft leasing outfits in history. In 1990 Hazy sold ILFC to AIG. I am sure he cashed out a bundle for his effort. He stayed on as CEO for another twenty years.

In 2006 his net worth was reported at $3.1b. He took a big hit with shares of AIG that he must have owned but in 2009 another estimate comes up at $2.2b. He did fine.

He must have struggled at ILFC the past few years. He was once partnered with a strong AAA, now his parent is a ward of the state. ILFC may be a crown jewel, but it was a tough sale. It’s too big. A transaction at even a remotely fair price would have been difficult to achieve. There simply is not enough private equity and public debt to swing a transaction like that.

Four months ago Hazy left ILFC. He took with him his long time CFO John Plueger. These two must have burned some midnight oil. They started a new company, Air Lease Corp. Funded it with equity. Arranged a $10b lending facility from 9 banks. Bought 136 aircraft and spent all the money. Not a bad first four months.

The people in this industry think that Hazy walks on water. I got a kick out of this lame comment from Norm Liu, president and chief executive of General Electric Co.’s aircraft leasing unit:

“I sure hope he’s right because we’re ordering some too.”

I think Mr. Liu is just hoping (He better be; GE bought 100 planes) No doubt Hazy is too. I, for one, would not want to be going into a capital-intensive business that is elastic to future global GDP. One that is dependent on favorable tax laws, subsidies for half of all deliveries and one that relies on the continued availability of cheap credit.

I wish Mr. Hazy well. He has a good story. But he is going to cost the US taxpayers some serious money. Whatever one might have thought of the value of ILFC (the AIG sub) four months ago, that value is lower today. A lot lower. My guess is that Hazy would like nothing better than to crush the life from his former employer. He’s off to a great start.