They're Back!... AIG Pimping Feds for MORE Taxpayer Money!

Submitted by SadInAmerica on Tue, 02/24/2009 - 8:08pm.

AIG is in talks with the US government over a new bail-out aimed at giving the stricken insurer, which is already 80 per cent-owned by the authorities, fresh capital to absorb an expected fourth-quarter loss and more time to sell assets.

People close to the situation said AIG could announce the new rescue plan as early as next week, together with fourth-quarter results that are likely to show a loss bigger than the $24.5bn reported in the previous three months.

A new bail-out of AIG would be the third time in five months that the US taxpayers have come to the rescue of a company that was once a global insurance powerhouse and is now fighting for its survival.

Under the planned bail-out, which has not yet been finalised and could still change, the government would swap some of the $60bn five-year loan it extended to AIG in November, and maybe some of the $40bn in preferred stock it owns, for equity.

The debt could also be swapped for new obligations with different terms in order to give AIG more time to repay the loan. The company has been slow in selling off assets to pay back the government aid as potential buyers struggled to raise funds.

In return for the additional capital, AIG could cede ownership of some of its businesses or assets to the government. The government would then securitise them, putting them in discreet funds to be managed by outside managers.

AIG declined to comment on the size of its fourth-quarter losses but confirmed the talks with the authorities. “We continue to work with the Federal Reserve Bank of New York to evaluate potential new alternatives for addressing AIG’s financial challenges,” it said.

The US Treasury and the Fed declined to comment. People close to the situation said that AIG and the government would try to keep the authorities’ stake in the company to about 80 per cent but added that the Fed and Treasury could take full control of some of the insurer’s businesses or portfolio of assets.

Francesco Guerrera - February 24, 2009 - source FinancialTimes

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Submitted by SadInAmerica on Tue, 02/24/2009 - 8:08pm.