Related Party Transactions

3 Months Ended

Mar. 31, 2015

4. Related Party Transactions

Related Parties: As a result of the AerCap Transaction, AIG holds a significant ownership interest in AerCap. Consequently, AIG and its subsidiaries are considered related parties both before and after the Closing Date. AerCap and its consolidated subsidiaries, including AerCap Ireland Limited, and AerCap Ireland Capital Limited are related parties after the Closing Date.

Successor

Derivatives: The counterparty of all of our interest rate swap agreements is AIG Markets, Inc., a wholly-owned subsidiary of AIG, and these swap agreements are guaranteed by AIG. See Note 10—Derivative Financial Instruments and Note 18—Fair Value Measurements.

Management Fees: We earn management fees from two trusts consolidated by AIG (the ‘‘Castle Trusts’’) for the management of aircraft the Predecessor sold to the trusts in prior years.

Dividends and Capital Contribution: During the three months ended March 31, 2015, we recorded $5.8 million in stock compensation for AerCap share-based awards, as a capital contribution in Additional paid-in-capital.

Transactions with AerCap: AerCap provides us with certain managerial, finance, technical, marketing and support services which are essential to our business operations. We compensate AerCap for these services in accordance with AerCap’s global transfer pricing methodology. We had a net receivable from AerCap of $723.9 million as of March 31, 2015 relating to operational activities of AerCap including, but not limited to, the issuance and payoff of third-party debt, the purchase and transfer of aircraft, management fees allocated by AerCap and other cash transfers in the ordinary course of business.

Aircraft Leased to AerCap: Some of our aircraft are on lease to AerCap, which leases the aircraft to airlines. We recorded commission expense to AerCap of $0.5 million for the three months ended March 31, 2015, related to those leases.

Predecessor

Related Party Allocations and Fees: Prior to May 14, 2014, we were party to cost sharing agreements, including with respect to tax, with AIG. Generally, these agreements provided for the allocation of corporate costs based upon a proportional allocation of costs to all subsidiaries. Our management believed the proportionate method used to allocate corporate costs was reasonable. It was not practicable to determine what the amounts of those expenses would have been had we operated on a standalone basis. We earned management fees from two trusts consolidated by AIG (the ‘‘Castle Trusts’’) for the management of aircraft we sold to the trusts in prior years. For the period preceding our sale by AIG to AerCap, we were included in the consolidated federal income tax return of AIG as well as certain state tax returns, where AIG files on a combined/unitary basis. Settlement with AIG for taxes was determined in accordance with the tax sharing agreement we had with AIG up to the Closing Date. Prior to the Closing Date, under an agreement AIG entered into with AerCap, net tax payments under the tax sharing agreement were temporarily suspended, and the tax sharing agreement with AIG was terminated upon consummation of the AerCap Transaction. Our U.S. federal and state tax liabilities for tax years prior to May 14, 2014, including the liability related to unrecognized tax benefits, remained with AIG.

Derivatives and Insurance Premiums: The counterparty of all of our interest rate swap agreements was AIG Markets, Inc., a wholly-owned subsidiary of AIG. See Note 18—Fair Value Measurements and Note 10—Derivative Financial Instruments. In addition, we purchased insurance through a broker who may have placed part of our policies with AIG. Total insurance premiums were $1.6 million for the three months ended March 31, 2014.

Our financial statements include the following amounts involving related parties:



	Successor		Predecessor
	Three Months		Three Months
	Ended		Ended
	March 31, 2015		March 31, 2014
Income Statement
(Dollars in thousands)
Expense (income):
Allocated corporate costs from AerCap	$	28,771	$	—
Interest income on Receivable from AerCap		(14,810)		—
Effect from derivative contracts with AIG Markets, Inc. (a)		(946)		290
Interest on derivative contracts with AIG Markets, Inc.		948		2,015
Management fees received from Castle Trusts		(1,819)		(1,858)
Commission revenue from AerCap for consigned aircraft		(2,658)		—
Lease commission to AerCap		507		—
Corporate costs from AIG, including allocations				2,073
Interest on time deposit account with AIG Markets (b)				(361)



	Successor
	March 31,		December 31,
	2015		2014
Balance Sheet
(Dollars in thousands)
Asset (liability):
Receivable from AerCap, net	$	723,860	$	1,345,153
Receivable from AIG for compensation programs		266		5,716
Derivative liabilities (a)		(335)		(1,281)
Equity increase (decrease):
Stock compensation		5,762		14,876

____________________________

(a)

See Note 10—Derivative Financial Instruments.

(b)

We had a 30-day interest bearing time deposit account with AIG Markets, Inc., which was terminated in connection with the AerCap Transaction.

Successor

Cash flow activities: The following related party transactions are reflected in the Successor Statement of Cash Flows for the three months ended March 31, 2015: (i) Cash transfers to or from related parties; (ii) revenue received on aircraft leased to a related party; (iii) maintenance claims paid on our behalf by related parties; and (iv) corporate expenses either paid by us on behalf of a related party or paid by related parties on our behalf.

- Definition

The entire disclosure for related party transactions. Examples of related party transactions include transactions between (a) a parent company and its subsidiary; (b) subsidiaries of a common parent; (c) and entity and its principal owners; and (d) affiliates.

+ References+ Details

AerCap Global Aviation Trust 10-Q