Abbey groundsaircraft sell-off

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The Independent Online

Abbey National, the troubled high-street bank, will on Wednesday abandon plans for the early sale of its aircraft leasing business.

The decision to ground International Equipment Management (IEM) will be a blow to Abbey's chief executive, Luqman Arnold, who is under pressure to preserve the company's credit rating.

Mr Arnold is four months into a three-year programme to turn round the loss-making company. Under his back-to-basics plan, Abbey will focus on high-street banking and mortgages and pull out of wholesale banking.

But when Mr Arnold presents the City with an update on trading, he is expected to say that the downturn in the aviation market has forced the company to rethink its plans to sell Netherlands-based IEM. Abbey bought the company from Dutch bank ING in 2001 for £27m. The terrorist attacks of 11 September 2001, the Iraq war and the outbreak of Sars have wiped millions off the value of the business.

Abbey is now hoping to sell IEM in a couple of years, if the aviation market improves. But on Wednesday Mr Arnold is expected to warn that if there is no improvement to the market, then Abbey may have to break up IEM by selling off individual aircraft leases.

This is the second set-back to Mr Arnold's plans to sell off Abbey's "non-core" businesses. In April the company abandoned plans to sell two Dublin-based insurance businesses because of a lack of potential buyers.

Analysts believe that Abbey may also struggle to sell its Porterbrook train-leasing business, which it bought for £1.4bn in 2001. Most of Porterbrook's train leases have already been securitised through the debt market, which could limit its appeal to other banks. To add to Mr Arnold's woes, some analysts are concerned that shareholders will see little of the cash raised from disposals. Last week SG Securities downgraded its recommendation on Abbey from "buy" to "sell" over fears that the cash will be needed to prop up the company's credit rating.