Many media reports suggested that AIG's asset sale would be a
fire sale,
but it has become more like rubbing two sticks together and waiting for
a spark. The government has already increased AIG's $85 billion in
bailout financing to
$123 billion. As more time passes, the struggling company will be under
more pressure to sell its assets at discount prices or seek additional
financing in order to survive.
The company has been under tremendous pressure to trim back its excessive spending.
The Federal Reserve said AIG had borrowed $82.9 billion out of its $122.8 billion in credit available from the
central bank. A week earlier, AIG showed $70.3 billion in total
borrowing.
This week
New York Attorney General Andrew Cuomo sat down with CEO Edward Liddy to
trim down several expenditures including eliminating a March 2008 cash bonus of $5
million to former C
EO Martin Sullivan and a "golden parachute" of $15 million as well as departing CFO Steven Bensinger's severance package of about $10 million.
The New
York insurer also has canceled more than 160 conferences and events costing more than $750,000, for a total savings of more
than $8 million, according to the press release.
On top of that next week
AIG will institute a Special Governance Committee with new expense management controls and a brand new "Expense Policy Guidebook." Chances are that the new CFO David Herzog will be managing or involved in the new board. He also has the grueling task of having to figure out how AIG will pay off its $122.8 billion loan. And how will he do that? Well, for starters, through selling AIG's assets.
Blackstone Group LP and J.P. Morgan Chase & Co. are advising AIG on its asset disposals.Here's what has been sold so far:
- AIG Highstar Capital II LP has sold a 50% stake in Dutch
utility InterGen NV to Bangalore, India, private sector infrastructure
developer GMR Infrastructure Ltd. AIG Highstar said it would sell its
InterGen stake to GMR in June for $1.1 billion.
- The insurer has already sold its 50% stake in London City Airport
Ltd. to its joint venture partner, Global Infrastructure Partners, for
an estimated $460 million.
Here are the operations for sale:
- AIG American General, a life insurance company based in Houston
- AIG Direct, which covers auto, motorcycle, recreation vehicle and commercial vehicle insurance
- Alico, its life insurance operations in the U.S., Europe, Latin America, South Asia and Japan
- Real estate,
AIG owns $16 billion worth of properties in more than 30 countries
and 14 U.S. cities including AIG's headquarters at 70 Pine St. in lower
Manhattan
- Financial Services, which includes aircraft leasing, capital markets and consumer finance operations, including AIG's International Lease Finance Corp.
Bank of America was hired to advise it on the sale of its U.S. personal lines business, according to
Reuters.
The insurer also has hired investment bank Keefe, Bruyette &
Woods to sell its Hartford Steam Boiler Inspection and Insurance Co.
unit, Reuters reported. - Maria Woehr
Has anyone noticed that American International Group Inc. hasn't sold much of anything yet? It looks like AIG's asset sales could be in trouble due to the economic climate. AIG's restructuring may have stalled because potential buyers are having a hard time financing deals, according to Reuters.
