AIG gets NY state help to stave off cash crunch
Written on September 16, 2008
A complex asset swap brokered by New York state officials will give embattled American International Group a $20 billion lifeline, but the insurer’s longer term rescue plan will depend on additional funding.
JPMorgan (JPM.N: Quote, Profile, Research, Stock Buzz) and Goldman Sachs (GS.N: Quote, Profile, Research, Stock Buzz) are exploring putting together a syndicated $70 billion to $75 billion credit facility for AIG, among other options, one person familiar with the matter said on Monday.
The banks’ efforts are supported by the Federal Reserve, which AIG (AIG.N: Quote, Profile, Research, Stock Buzz) appealed to for assistance late on Sunday — one of Wall Street’s most tumultuous days ever, with Lehman Brothers Holdings Inc (LEH.N: Quote, Profile, Research, Stock Buzz) on the verge of collapse and Bank of America (BAC.N: Quote, Profile, Research, Stock Buzz) moving to take over Merrill Lynch & Co
(MER.N: Quote, Profile, Research, Stock Buzz).
AIG turned to the Fed after unsuccessful negotiations with several private equity firms and Warren Buffett’s Berkshire Hathaway (BRKa.N: Quote, Profile, Research, Stock Buzz).
AIG’s troubles, much like those of some of its Wall Street peers, stem from guarantees it wrote on mortgage-linked derivatives that have left it with a total of $18 billion in losses over the past three quarters.
AIG in recent days has explored a wide range of options to shore up capital and avoid rating cuts, but the three top global rating agencies downgraded anyway, and warned more downgrades could follow, potentially making it harder and more expensive for AIG to raise new capital.
Moody’s Investors Service cut AIG’s rating to A2 from Aa3, a two-notch downgrade payday loan cash advance loan. Standard & Poor’s Ratings Services lowered the rating to A-minus from AA-minus, a three-peg reduction and Fitch Ratings reduced its standing to A from AA-minus, a two notch cut.
Filed in: management.