Friday, September 19, 2008

New deal for AIG?

We had this story in the WSJ this afternoon:

Major shareholders are pursuing an effort to try to help pay off the federal government's loan to American International Group Inc. in time to avoid having Washington take an 80% stake in the company, according to a person familiar with the matter.

Hurdles to these shareholders' efforts could be high, as they and other investors they may attract would have to put up significant sums.

This week, the government agreed to lend AIG up to $85 billion to help it avoid possible bankruptcy, in exchange for a right to take a controlling stake in the giant insurance conglomerate.

The shareholder effort is aimed at trying to make sure the government gets paid back quickly, so that it won't need to take the stake, the person said. That goal could be accomplished not only through asset sales that the company is planning but also possibly through investments in AIG from large investors, such as sovereign wealth funds.

The approach could be more beneficial to existing shareholders than the government deal, because it would inject capital in exchange for the equity. In the government arrangement, the government would get equity in exchange for a loan.

I heard about this late yesterday, and wrote about it this morning.

A word on AIG
Look for "whispering" that terms may be changed on the Government bailout.
Posted by Palmoni at 7:19 AM

Now that it's out in the open here's a 30 second rundown. A best case is private investment or a diminished government stake.

Considering the health of the markets, and the changing fortunes of AIG's portfolio and credit default swaps, maybe that deal will be changed.

Why not? Doesn't this stock have the largest amount of naked shorts on the board? It only traded 2 billion shares the last few days.

And the government is inclined to "Get Shorty!"

And maybe AIG can find help with the sovereign wealth funds coming to the table and some sale of assets!

With short selling restrictions, the story could get legs.

No comments: