AIG seeks relaxation of Fed rules on asset sales

01 January 2009

Beleaguered insurer American International Group Inc (AIG), has sought relaxations of Federal Reserve rules on its $60-billion disposals programme as part of the deal under which it received funds from it.

In a crisis-hit credit market prospective buyers are finding it difficult to dole out cash. Reports AIG has therefore sought flexible options like installment payments or allowing bidders to pay using a greater portion of shares, thereby making it easier for them to bid for its assets.

The strategy is aimed at attracting more buyers and improving competition for selling its assets, it has already identified.

It will also help AIG counter the perception that it is under pressure to sell its assets at throw away prices to pay back its government loan. This has come about as AIG is facing problems in selling its assets at competitive prices in the market, thus damaging its image.

In the last 10 days it has sold its Hartford Steam Boiler (HSB) unit for $742 million Munich Re, to the world's biggest reinsurer, for about third less than what it paid for it eight years ago, and well below HSB's value estimated between $1 billion and $2 billion (See: Munich Re to buy AIG unit for a bargain price of $742 million) as AIG is forced to sell off units to pay back a US government bailout loan (See : $85-billion bailout for AIG  and Fed pumps another $37.8 billion in AIG).

AIG has received loans amounting to $152 billon - $39.5 billion of a $60 billion bridge loan in lieu of it selling off non-core businesses to repay the government; $28.2 billion of $30 billion from the US Fed to purchase $62.1-billion worth of collateral debt; $20 billion of $22.5 billion from the Fed to purchase residential mortgage-backed securities and last month $40 billion under the Troubled Asset Relief Program.