The recently announced sale of Boullioun Aviation Services by WestLB will likely lead to an aircraft lease securitization shortly after the transactions' close, said sources with knowledge of the situation. Boullioun's attractive lease portfolio and forward delivery schedule, combined with the likely financial needs of potential acquirers, have many expecting an ABS from the new entity, depending on which competitor purchases the unwanted unit.

Boullioun has securitized in the past, in a $950 million private transaction named Rainier Securitization Trust that was placed into a conduit in December 2002 via JPMorgan Securities and WestLB as joint leads. In May, reports surfaced that Boullioun had mandated Citigroup Global Markets to lead an aircraft lease securitization, which never came to fruition.

On July 2, WestLB has hired Citigroup to arrange the sale, which reports valued between $300 million and $400 million. The leading candidates were identified by the Financial Times as being debis AirFinance, RBS Aviation Capital and Aviation Capital Group. While GE Capital Aviation was dismissed by FT as a potential interested party, market participants would not rule out the world's leading aircraft lessor from winning the bid.

Some private equity involvement is also expected, which may come from units of investment banks as well as hedge funds, sources added.

"Somebody will buy Boullioun. An announcement should come within the next few weeks," one source said. "The probable buyers will look to securitize, unless its GE or RBS." The source noted the financial strength of the parents of both leasing units.

Talk of reasons for the sale centered on WestLB's losing its Landesbank status, as well as the aforementioned term aircraft lease ABS, which was scrapped.

Boullioun, a niche aircraft lessor, owns entirely newer vintage, narrow-body AirBus aircraft, which remain in demand from carriers. The acquisition of Boullioun is seen as a steppingstone for second-tier lessors to leapfrog into the top tier currently made up of GE Capital Aviation and International Lease Finance Corp., a unit of triple-A rated American International Group.

"In order to survive in the aircraft leasing business, you need a low cost of capital," said one aircraft-sector equity analyst. "The smaller players are at a funding disadvantage. For one of the smaller players to move up to that top tier, a well capitalized balance sheet is a must," he added.

Boullioun, acquired by WestLB from Deutsche Bank in 2000 for $1.2 billion, will be on its fourth owner once a deal closes, according to reports. Prior to Deutsche Bank, Sumitomo Bank had owned Boullioun.

Copyright 2004 Thomson Media Inc. All Rights Reserved.

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