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Sunday, November 8, 
9:20 am

AIG to Fed: You pay us so we can pay you

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If Uncle Sam wants to get its money back from American International Group Inc. (NYSE: AIG), it better dole out more moola to the battered insurer. Does that make any rational sense? Any loan shark worth his salt would say no. It appears as if logic has been tossed out of the window by AIG, as it has asked the Federal Reserve for a $5 billion credit line to help facilitate the sale of its aircraft leasing business, International Lease Finance Corp., as reported late Tuesday, April 7, by the Financial Times, citing people close to the situation.

The credit line would come from the $180 billion rescue package the government has already extended to AIG, the FT reported.

An AIG spokesman did not return calls.

The insurer needs help from the government to sell ILFC because AIG has agreed to help a buyer with financing, according to earlier reports. AIG does not have the funds to meet debt obligations for ILFC's operations in 2009 due to the struggling airline business and the loss of its federal commercial paper lending facility after key credit ratings were cut.

An acquisition of the Century City, Calif.-based subsidiary would trigger change of control provisions in ILFC's $6.5 billion of bank lines, of which $2 billion is included in 2009 maturities, Standard & Poor's stated in a January ILFC downgrade report. This would call for repayment or amendment of debt covenants, S&P said.

ILFC had a book value of $7.5 billion as of Sept. 30, and analysts have said bids could be between $5 billion and $7 billion, so at least the government may get back the $5 billion credit line if the sale goes through. But what about the remaining billions and billions that an ILFC sale was supposed to help pay down?

Let's cut AIG some slack -- the company has been able to complete a few sales without the government's help. On Wednesday, it announced the completion of the previously announced sale of Thailand-based AIG Retail Bank Public Company Ltd. and credit card operation AIG Card (Thailand) Co. Ltd. to Bank of Ayudhya Public Co. Ltd. Proceeds from that transaction were approximately $45 million, plus the repayment of about $495 million in debt. -- Michael Rudnick

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Comments

From: jose pablo chaves,

as gordon geckos said!!!!!!! that is a DOG with FLEAS!!!!!! lots!!!!!!


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