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Macquarie Bank, Australia's largest securities firm, Babcock & Brown and Allco Finance Group are among bidders for US leasing company Pegasus Aviation Finance, people with knowledge of the sale said.
The firms submitted separate non-binding price estimates to Merrill Lynch this month the sources said, declining to be identified as talks are private.
Pegasus, about 90 per cent owned by Los Angeles-based private equity firm Oaktree Capital Management, may fetch as much as US$1.5 billion ($2 billion) including debt.
Pegasus has a fleet of 250 planes, leased to more than 80 companies including United Airlines and British Airways.
Companies including Macquarie, Dubai Aerospace Enterprise and Bank of China are seeking to buy leasing businesses in an industry expected to grow to US$144 billion by next year.
"There is significant demand for leasing and financing of new aircraft to cope with the increase in global demand for air travel," said Jack Chemello of BT Financial Group in Sydney. "Financiers of those aircraft are in pretty strong positions."
Oaktree hired Merrill Lynch to help with the sale. Twenty potential buyers expressed interest, a person familiar with the pitch said.
Oaktree invested in San Francisco-based Pegasus in March 2004, according to Pegasus' Web site.
Spokesmen for the bidding companies either declined to say anything or weren't able to comment.
Standard Chartered bank received sale documents for Pegasus but decided not to make an offer, sources said. Dubai Aerospace Enterprise, an airport and aviation services company owned by the Persian Gulf emirate, also chose not to bid, Gulf News reported this month, citing an unnamed company executive.
Leasing companies are benefiting from airline passenger traffic that increased 5.8 per cent in the first 10 months of 2006, according to the International Air Transport Association.
One measure of the rise in leasing is a drop in the planes owned by carriers worldwide. Airlines owned 54 per cent of their fleets last year, from 71 per cent in 1990, aviation consultant Simat Helliesen & Eichner says.
The global market for leased aircraft will be worth US$144 billion by next year, from US$115 billion in 2004, according to Frost & Sullivan, a New York-based research company.
Leasing Buyout Bank of China last month won its bid for Singapore Aircraft Leasing Enterprise, Asia's biggest plane-leasing operation, agreeing to buy all of the company's shares for US$965 million.
Allco chairman David Coe said in November that the company was among the final four bidders for Singapore Aircraft.
Allco invests in shipping, property and aircraft leasing and counts former British Airways chief executive Rod Eddington and former Cathay Pacific Airways managing director David Turnbull as board members.
Macquarie and Allco Finance are part of a group buying Qantas Airways, Australia's largest airline.
GATX, which leases airplanes and railroad cars, agreed in September to sell most of its aircraft unit to a group including Macquarie and Och-Ziff Capital Management Group.
Dubai Aerospace, set up almost a year ago with $15 billion of debt and equity, wants to rival American International Group's International Lease Finance and General Electric's GE Commercial Aviation Services.
Babcock had 190 aircraft under management as at June 30, according to company reports.
- BLOOMBERG
