New York, Sept 21: Major shareholders of the troubled
insurance giant American International Group (AIG) are pursuing an initiative to help the company pay off the government loan, in time to avoid having Washington take a controlling stake in the company, a media report said on Sunday.
Under this effort, the company would raise capital and
possibly sell off assets, potentially leaving current
shareholders better off, the Wall Street Journal said.
Hurdles to these shareholders' efforts could be high, as
they along with other investors would have to put up
significant sums, given that the government had agreed to lend AIG up to USD 85 billion to help it avoid bankruptcy, in
exchange for an 80 percent stake in the insurance
conglomerate.
The approach, the report said, could be more beneficial to
existing shareholders than the government deal, because it
would inject capital in exchange for the equity. Under the
government arrangement, the government would get equity in
exchange for a loan.
Edward Liddy, who was named AIG's chief executive this
past week as part of the deal with the government, however, was quoted as saying that he had no knowledge of the shareholder effort.
Confusion also arose over the effort after AIG on Friday
made a filing with the Securities and Exchange Commission about the deal with the government that said it was correcting errors in a filing it made on Thursday.
In the Thursday filing, AIG said it had issued a warrant
to the Federal Reserve board letting it obtain 79.9 per cent of
AIG's common stock outstanding, "subject to shareholder
approval."
In the Friday filing, the Journal said, the "shareholder
approval" language was absent and AIG said "the corporate
approvals and formalities" needed to give the government its
stake would depend on the form of that stake.
"We have not finalised all of the documents," a spokesman
for the New York Fed, which is lending AIG the money, told the
paper. It had already given it USD 28 billion as of Wednesday.
Investors, the paper said, are exploring options. AIG
shareholders have suffered severely this year, thanks largely
to losses linked to the mortgage market.
The stock has fallen more than 90 percent this year
forcing AIG to consider selling off chunks of the company to
pay off the loan.
Bureau Report