South Korean group in advanced talks to buy into AirAsia leasing unit

SINGAPORE/SEOUL (Reuters) – A little-known South Korean group is in advanced talks to acquire a stake in AirAsia Bhd's aircraft leasing unit, according to three people familiar with the matter.

Two of the people said a deal would value AirAsia's fully-owned unit, Asia Aviation Capital, at roughly $900 million.

Privately-owned KOTAM, or Korea Transportation Asset Management, has been picked as the preferred bidder, the people said, with one adding that state lender Korea Development Bank (KDB) was tapped to provide funding, though it was not clear whether the bank had agreed to back the deal.

KOTAM is part of Kukje Maritime Investment Corp., known as KMarin, which was founded in 2005 and has a fleet of 46 ships, according to its website.

KOTAM, KDB and AirAsia did not have immediate comment.

A successful deal would mark South Korea's biggest move into the $256-billion global aircraft leasing sector, which has attracted others in Asia, including Industrial and Commercial Bank of China, BOC Aviation, China's acquisitive HNA Group, and Japanese banks.

KOTAM and AirAsia are negotiating final terms of the purchase of a majority stake in the leasing unit, one of the sources said. Asia's biggest budget airline has sought buyers for its subsidiary since last year, and has said it aimed to close a sale early this year.

A deal with KOTAM could still fall through, and two sources said that Air -Asia has not closed the door to a deal with a Chinese bidder.

The sources declined to be identified as the negotiations are ongoing and confidential.

South Korean insurers, asset managers and securities firms are attracted to aviation finance as aircraft leases offer fixed returns and are often seen as relatively safe transactions.

Paid for in US dollars, aircraft are comparatively easy to release to various airline operators across the world.

Reuters reported in December that AirAsia had received strong interest from North Asian firms, besides many Chinese companies.

One of the sources said AirAsia was becoming concerned about Chinese buyers' ability to close a deal due to China's recent measures to tighten controls on money moving out of the country.