Rumors that American International Group Inc. is in
deep trouble are swirling furiously since Lehman Brothers Holdings Inc. sought bankruptcy protection.
Analysts have apparently downgraded the insurer's ratings because it is likely to suffer $10 billion in super-senior CDS losses and $5 billion in realized investment portfolio losses in the third quarter due to the liquidation of Lehman Brothers, according to a
Reuters report citing analysts at UBS.
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It also has exposure of $500 million to $600 million in preferred shares of Fannie Mae and Freddie Mac and has reported more than $18 billion of losses.
To resolve its losses, there were reports on Friday that AIG will
announce a plan to restructure that includes selling off assets,
including a profitable
aircraft leasing arm.
On Saturday
there were various reports that AIG is in discussions with buyout firms
including Kohlberg Kravis Roberts & Co. and J.C. Flowers & Co. LLC to raise $20 billion
in capital and sell $20 billion of
assets, according to reports by
Bloomberg. However,
The Wall Street Journal
is reporting that over the weekend, AIG turned down a capital infusion
from, "a group of private equity firms led by J.C. Flowers & Co." because it would have given the PE firms control of the company.
In reaction, chief executive Robert Willumstad apparently
reached out to the Fed seeking a a $40 billion bridge loan from the Federal Reserve on Sunday, according to reports in
The New York Times and
The Wall Street Journal. More reports circulating Kohlberg Kravis Roberts & Co. and
TPG Capital have apparently offered to inject capital into AIG if the insurer gets support from the Fed.
Of course all of the rumors have started talks on the Google and Yahoo! discussion boards. Here is a peek.
The stock is down to
$12.14. -
Maria Woehr
