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 That's right. American International Group Inc. (NYSE:AIG) needs more money and is in discussions with the U.S. government to overhaul its $150 billion government bailout package prior to releasing dismal fourth-quarter results that could top $60 billion.If what The Wall Street Journal is reporting becomes fact, AIG's "fire sales" would be accompanied by spinning off some of AIG's Asian holdings into public companies, with the government owning major stakes now that stock is down to 40 cents. The restructuring plan would pay off $60 billion of the government's $150 billion in loans with a combination of debt, equity, cash and stakes in operating businesses, and also include a safeguard of AIG's credit ratings that if downgraded could force the insurer to make its payments to trading partners. (Reports are AIG is still working on a kitchen sink.)
Who are these mysterious counterparties that AIG would have to spend the taxpayers' money paying off? Talking Points Josh Marshall guesses that Goldman Sachs Group Inc. (NYSE:GS) is behind it all, and it seems like most investors (what's left of them) want a breakdown of where that money the government loaned the company is going.
The government is going to have to make another move because it has already invested money in the sinking ship. And with most shareholders already wiped out, at this point AIG is practically nationalized. And is there even an alternative to formal nationalization at this point? The Aleph blog argues that the government should let the holding company fail, and file for Chapter 11: essentially guaranteed the obligations of AIG Financial Products in exchange for a senior loan that would subordinate all existing holding company debt. (Essentially a DIP loan, because the holding company would be in Chapter 11.) ... If large derivative counterparties are so critical to the financial infrastructure, then they need to be regulated as well. Open the derivative books to the regulator, and let the new regulator set leverage/capital policy. The Aleph blog suggestion makes sense. One of the major points throughout AIG's restructuring has been the "fire sale" prices of the asset sales due the the rapid decline in the valuation of assets and the lack of financing in the market. So arguably its assets are already selling at distressed prices like a bankrupt company might see. Why not use some sort of bankruptcy proceeding to formalize and organize what so far has been a chaotic process of asset sales? Here is a list of AIG's asset sales so far:
A spokesperson from AIG told Dealscape: "AIG has not yet reported fourth-quarter and 2008 year-end results. We continue to work with the U.S. government to evaluate potential new alternatives for addressing AIG's financial challenges. We will provide a complete update when we report financial results in the near future." - Maria Woehr CategoriesComments
From: Ex-AIG IT,
Yes, it is going down in flames that's why they are having a fire sale! Additional money won't do anything but allow this bunch of Sr. Management criminals to keep stealing from the public. How about we raise money by selling taking back the bonuses and selling off the Sr. Management's property first. I hear Greenberg still is fighting to get "his" Picasso back!
Posted on:
February 25, 2009 4:39 PM
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Is AIG an example that trying to bailout these failing companies is not working? AIG has received a $150 Billion rescue package from the government and still is reportedly asking for more help.
When these failing companies are still going under despite multi-billion dollar rescue packages is it time to reexamine the current economic initiatives being promulgated today by the government?
http://www.weeklypoint.com/2009/02/24/aig-fears-60-billion-loss-begs-for-more-taxpayer-money/