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American International Group, Inc. Message Board

  • passingstorm2007 passingstorm2007 Sep 16, 2008 11:16 PM Flag

    Final Word: SECURED LOAN; NO DILUTION

    As I stated previously, AIG got the best deal possible. GREAT NEGOTIATION on the part of the AIG team. The Fed used the "carrot /stick" approach vis a vis warrants for 79.9 percent of the company IF AIG DEFAULTS. In addition, the Fed wanted to restored confidence in the marketplace by removing permanently the risk of AIG going bankrupt. THE COMPANY WILL NEVER GO BANKRUPT because of the WARRANTS.

    So there you go, good hunting. You should have shorted from $21 to $4 dollars like me. And long at now at........

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    • Lmao shorts dont get it< the old ceo and his boys are going to buy them out !!!!!!!!!!! This gives them the time they needed. He is bigest share holder he can buy this company out for 85 bill easy !!!!!!!!!!!!!!!!! Np no sweat< and sell off what he wants !!!!!!!!!!

    • Apparently, you can't read very well. The 79.9% stake is IN ADDITION to any collateral.

      Tell me why the Fed statement (Reuters story that contains THE TEXT OF THE US GOV's STATEMENT) contain the words...."the US Gov will RECEIVE a 79.9% stake in AIG"???

      It says NOTHING about this being contingent.

    • Too stupid for words.

    • Moron,

      Do you know what warrants are?
      Read the following WSJ article

      The U.S. negotiators drove a hard bargain. Under terms hammered out Tuesday night, the Fed will lend up to $85 billion to AIG, and the U.S. government will effectively get a 79.9% equity stake in the insurer in the form of warrants called equity participation notes. The two-year loan will carry an interest rate of Libor plus 8.5 percentage points. (Libor, the London interbank offered rate, is a common short-term lending benchmark.)

      The loan is secured by AIG's assets, including its profitable insurance businesses, giving the Fed some protection even if markets continue to sink. And if AIG rebounds, taxpayers could reap a big profit through the government's equity stake.

      "This loan will facilitate a process under which AIG will sell certain of its businesses in an orderly manner, with the least possible disruption to the overall economy," the Fed said in a statement.

      It puts the government in control of a private insurer -- a historic development, particularly considering that AIG isn't directly regulated by the federal government. The Fed took the highly unusual step using legal authority granted in the Federal Reserve Act, which allows it to lend to nonbanks under "unusual and exigent" circumstances, something it invoked when Bear Stearns Cos. was rescued in March.

    • From Bloomberg the government gets a 79.9 stake on the company. So it's probably not warrants, which do not constitute a "stake." Also, management will be changed (thanks God!) and there will be a LIBOR + 850bp interest rate on the loan.

    • Think again, the AIG stock is only worth whatever value is left after paying back the new $85 bn in loans with interest at LIBOR+850 (about 10%, which costs $8.5bn per year just for this financing) plus whatever existing liabilities are still outstanding after the new $85bn in proceeds are used to either post collateral or pay off some existing debt.

      The US taking 80% of the equity was just to wipe out the common - for no other reason, the gov;t is not even assured of even getting their money back on the loan plus the high interest.

      Going forward, whatever value if any might be left will now be spread over 5x the share count (1 / .2) due to the 80% dilution from the penny warrants.

      Now ask yourself, how low its going. answer is: penny stock, same as FNM, etc

      • 3 Replies to portfolio01
      • What makes you think they will take a penny? This was to re-establish the AAA rating, pal. Face it-you are screwed and should cover ASAP.

      • I know you are smarter than your post. The Government is lending a line of credit to AiG with a major part of the company as collateral. Yes, if they took over 80% of the company and sold it all tonight to pay off the loan, what you wrote would be true. But, this is not what they are doing. The assets sold will pay off the portion of the loan they use, if they use it. There will be no stock dilution, for the company will still retain it's assets, operation, and there will be no take over of the company. Besides, the warrants the government will get would be worth more if the company makes money.

        The warrants can be converted to common stock!!! So, the more common stock is worth, the more money the government gets in return.

      • And how long will it take AIG to pay this back? A week? Two, maybe?

    • Great grammar, so are you saying we should be long now?

 
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