Tuesday, February 24, 2009

AIG To Abandon Asset-Sale Plan

The latest chapter in the National Geographic special on the AIG black hole is that the company will scrap the plan to repay the $60 billion governmental loan by selling businesses, as no bidders for its assorted businesses have materialized. Bloomberg reports:
Chief Executive Officer Edward Liddy, who took charge in September and unveiled the strategy the following month, has concluded it won’t work, said the people, who spoke on condition of anonymity because the insurer’s talks with the government are private. AIG is proposing additional ways to reduce the company’s debt to the U.S., including handing over stakes in some operations directly to the government, a person said.

Sounds like some involuntary asset transfer to the taxpayer portfolio coming up. Marshall Front, CEO of Front Barnett Associates, is noting the obvious "AIG’s problems have been underestimated by everyone looking at it. The exit strategy from here is extremely murky; each time we seem to have temporarily fixed a problem, additional severe problems have emerged.”

As discussed yesterday, the upcoming loss will likely force the rating agencies to downgrade AIG even more, forcing additional collateral posts, which will likely amount to more than $7 billion as per prior disclosure from AIG, and would also lead to the company's loss of access to the Fed's CP program. Bottom line - while it is a stretch to believe the company will file, it is likely on its road to absorb a trillion in cash by the end of 2009 from US Taxpayers, and over $30 trillion by 2011 (this is a joke... maybe) Sphere: Related Content
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