The Wall Street Journal Comments on AIG
Written February 24, 2009 at 12:35 AM EST by Danish FX
American International Group, Inc WSJ comments on speculation regarding the company
- The article notes that the company is seeking an overhaul of its $150B government bailout package that would substantially reduce its financial burden, according to people familiar with the situation.
- Under the plan, the government loan of up to $60B would be repaid with a combination of debt, equity, cash and operating businesses, such as stakes in AIG’s Asian life-insurance unit.
- WSJ adds that AIG and the government have been discussing the changes since Dec and plan to announce them by Monday when the company is expected to report its earnings.
- Under the new structure, AIG’s interest burden on the government money would be reduced.
- AIG currently pays 3% plus Libor.
- AIG also pay a 10% annual dividend on a separate $40B investment by the government.
- The plan may entail AIG continuing to try to sell some assets, but other assets would be transferred to the government in lieu of cash repayment.
- The assets would likely be spun off and may be taken public with the government owning a major stake.
- According to a person close to AIG, the government’s stake in the company is currently about 80% and is unlikely to be substantially changed in the near term.
- One of the restructuring plan’s central goals is to safeguard AIG’s credit rating, which, if cut, would force the company to make billions of dollars in payments to its trading partners.
- The new plan is being structured in close consultation with the major credit-rating agencies.
- WSJ notes that the talks with the government are ongoing and while they are at an advanced stage the deal may still fall apart or change significantly.
- One major sticking point is how to value the assets.
- Says AIG’s total loss for Q4 is likely to top $60B.
- WSJ says inside the Fed, officials have been worried about AIG’s Q4 loss and about the risk that the company will have its credit rating cut.
- Under the plan, the government loan of up to $60B would be repaid with a combination of debt, equity, cash and operating businesses, such as stakes in AIG’s Asian life-insurance unit.
- WSJ adds that AIG and the government have been discussing the changes since Dec and plan to announce them by Monday when the company is expected to report its earnings.
- Under the new structure, AIG’s interest burden on the government money would be reduced.
- AIG currently pays 3% plus Libor.
- AIG also pay a 10% annual dividend on a separate $40B investment by the government.
- The plan may entail AIG continuing to try to sell some assets, but other assets would be transferred to the government in lieu of cash repayment.
- The assets would likely be spun off and may be taken public with the government owning a major stake.
- According to a person close to AIG, the government’s stake in the company is currently about 80% and is unlikely to be substantially changed in the near term.
- One of the restructuring plan’s central goals is to safeguard AIG’s credit rating, which, if cut, would force the company to make billions of dollars in payments to its trading partners.
- The new plan is being structured in close consultation with the major credit-rating agencies.
- WSJ notes that the talks with the government are ongoing and while they are at an advanced stage the deal may still fall apart or change significantly.
- One major sticking point is how to value the assets.
- Says AIG’s total loss for Q4 is likely to top $60B.
- WSJ says inside the Fed, officials have been worried about AIG’s Q4 loss and about the risk that the company will have its credit rating cut.
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