The busiest dealmaker in the world with little results to show for it, American International Group Inc.'s new vice chairman and restructuring chief, told Bloomberg on Friday that AIG may consider preparing some of its business units for initial public offerings. Rumors of interest in the multitude of AIG units on the block to help pay off the $60 billion Federal Reserve loan, which is part of a larger $150 billion rescue package, have grabbed headlines on a daily basis. However, most of these thinly sourced rumors have not materialized into actual sales, and AIG remains on the hook with the five-year clock ticking and interest on the loan mounting. So far, AIG has only signed deals to sell its Swiss private bank for about $369 million, a 48% stake in a Brazilian division for $354 million and its Hartford Steam Boiler Business for $742 million. Only about $58 billion to go to pay off Uncle Sam.
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If you can't sell businesses amid frigid credit markets, why not spin them off in IPOs? "The notion of an IPO is silly," said one source, adding that "anybody who takes a look at the public market anytime in the past few months would find this amusing." He added that by saying AIG would use the public markets after initially planning to sell assets is "somewhat transparently saying that you are having difficulties with sales."
IPOs out of desperation? Quite a vote of confidence for prospective investors. I guess buyers into these IPOs would be able to get shares on the cheap. But, doesn't Reynolds think that the Street might be a bit gun-shy about buying into IPOs of AIG businesses after AIG's shareholders took a blood bath last year due to the whole credit default swap mess. It's not so easy to build up investor trust for new IPOs after your entire shareholder base ate it due in part to what may be a lack of transparency.
And by the way, has Reynolds taken a look at the IPO market lately? There isn't one, and it doesn't look like sunny skies are near. A December 2008 KPMG LLP survey of 270 venture capitalists, corporate buyers and entrepreneurs found that 88% of those surveyed expected IPO activity to stay at the same dismal levels or decline further, while the same number don't expect any type of recovery for at least 12 months, as earlier reported by The Deal. - Michael Rudnick
