UPDATE 2-Terra Firma among ILFC bidders -- source

* Terra Firma, THL-Carlyle, Onex-Greenbriar bid

* Negotiations to stretch over few weeks

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By Paritosh Bansal

NEW YORK, April 27 (Reuters) - Private equity firm Terra Firma Capital Partners Ltd [TERA.UL] is one of three groups to bid for American International Group Inc's (AIG.N) aircraft leasing business, which drew offers under $5 billion, a source familiar with the matter said on Monday.

International Lease Finance Corp (ILFC) also drew second round bids from groups led by private equity firms Thomas H. Lee Partners and Carlyle Group [CYL.UL], and Onex Corp (OCX.TO) and Greenbriar Equity Group, the source said.

Negotiations over the terms and the price are expected to stretch over the next few weeks, the source said.

AIG, Carlyle and THL declined to comment. Terra Firma, Onex and Greenbriar could not be reached immediately for comment. The source did not want to be identified as talks are private.

At less than $5 billion, the bids fall short of ILFC's book value of $7.6 billion at the end of last year, but AIG, which is trying to repay the U.S. government after a massive bailout, is looking to sell the business in a tough market for credit as well as the airline industry.