FLY Fly Leasing Limited

Babcock & Brown Air Ltd. (FLY) will look at acquiring "chunks" of aircraft leasing portfolios after announcing an internal financial restructuring on Friday.

The Dublin-based company, known as B&B Air, is taking a 15% stake in the privately owned firm that runs its fleet of 62 commercial aircraft as part of a management buyout of the unit, which had long been seen as a takeover candidate.

The management business, to be renamed BBAM LP, will also take a 3.3% stake in B&B Air.

NYSE-listed B&B Air is led by Chief Executive Colm Barrington, an industry veteran who is also nonexecutive chairman of Aer Lingus PLC (EIL1.DB), the Irish airline.

The twin moves end uncertainty over the future of the management business, which also oversees another 230 aircraft on behalf of investors.

It is being acquired from Babcock & Brown Group, the bankrupt Australian finance and advisory company, but had long been seen as a target of Japan's Nomura Co. Ltd. (9716.TO), according to people familiar with the situation.

The aircraft leasing market has been in a state of flux as the financial parents of some of the largest operators - including American International Group Inc. (AIG), CIT Group Inc. (CIT) and Royal Bank of Scotland Group PLC (RBS.LN) - considered selling their operations.

Babcock's aircraft management unit is headed by B&B Air Chairman Steve Zissis. His team members are taking an 85% stake in BBAM LP and paying an average of $8.78 a share to boost their holding in the NYSE-listed Babcock & Brown Air. Its shares closed Thursday at $10.35, having listed in September 2007 at $23.

B&B Air spokesman Matt Dalton said the company was a potential acquirer of aircraft. "We would not be opposed [to buying] chunks of portfolios," he said.

-By Doug Cameron, Dow Jones Newswires; 312-750-4135; doug.cameron@dowjones.com

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