LOS ANGELES (Bloomberg)—American International Group Inc.'s plane-leasing unit boosted a debt offering to $4.4 billion of secured and unsecured notes as it seeks to repay a portion of loans from the bailed-out insurer.

International Lease Finance Corp. plans to sell $1.35 billion of four-year debt, and $1.275 billion each of six-and eight-year notes, all senior secured, according to a person familiar with the transaction. ILFC also plans to issue $500 million of senior unsecured seven-year notes, it said Wednesday in a statement distributed by Business Wire.

Proceeds will repay a portion of outstanding secured loans from AIG Funding Inc., a financing division, according to company statements. AIG CEO Robert Benmosche is seeking to manage debt of the units as AIG looks to repay a 2008 government rescue that swelled to $182.3 billion. The insurer said Wednesday it's selling a majority stake in its American General Finance Inc. consumer lending unit, with more than $17 billion of debt, to Fortress Investment Group L.L.C. at a loss.

ILFC, based in Los Angeles, previously planned to sell as much as $2.5 billion of senior secured notes, according to a statement Monday. The increase to $3.9 billion was confirmed by Paul Thibeau, spokesman for ILFC, who didn't specify portion sizes.

The cost to protect against losses on ILFC bonds rose the most in two months. Five-year credit-default swaps tied to the unit climbed 36 basis points to 580 basis points, according to data provider CMA. The contracts typically rise as investor confidence deteriorates.

ILFC regained access to outside funding this year after being shut out of credit markets because of downgrades of New York-based AIG. The company has made “significant progress” tapping capital markets this year to raise funding, Standard & Poor's Corp. analyst Christopher DeNicolo said in June.

The four-year notes may yield about 6.625%, the six- year notes may pay about 6.875%, and the eight-year debt may yield about 7.25%, said the person familiar with the transaction, who declined to be identified because terms aren't set.

ILFC sold $2.75 billion of notes in March, according to data compiled by Bloomberg. The company issued $2 billion of debt in two parts on March 17, and an additional $750 million of notes through a March 30 reopening, the data show. ILFC sold $1.5 billion of 8.75% notes due 2017, and $1.25 billion of 8.625% debt due 2015.

Collateral pool

AIG opted in May, for the first time in four quarters, to stop extending the date it was committed to supporting the aircraft-leasing unit, according to a May 7 regulatory filing. The insurer said it plans to provide support to ILFC through Feb. 28.

The proposed $3.9 billion of secured debt will be backed by a first-priority lien on a “segregated collateral pool” comprising 122 aircraft and related equipment and leases, the person said.

The $4.4 billion sale would be the biggest offering since Kreditanstalt für Wiederaufbau, Germany’s state-owned development bank, sold $5 billion of notes on July 7, Bloomberg data show. It would also be the eighth-biggest corporate debt offering in dollars this year, the data show.

The secured debt may be rated Ba3 by Moody’s Investors Service, one level above ILFC’s B1 corporate family rating “based upon terms that meaningfully lower secured creditors’ risk of loss compared to holders of ILFC’s unsecured obligations,” the ratings firm wrote in a Monday note.

The notes may be rated BBB- by S&P, according to a Tuesday note from the company.

ILFC’s senior unsecured notes may be rated B1 by Moody’s and BB+ by S&P, the person said.

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