Fed & AIG Considering Re-Structuring Deal Including Points as Proposed by Maurice Greenberg
The Fed and AIG may be re-structuring their recent deal and considering terms proposed in a recent October 2008 letter sent by former AIG chief Maurice Greenberg to present Chairman/CEO Edward Liddy.
Instead of having AIG liquidate its vital holdings to pay off an ever growing bridge loan, that comes with a 14% per annum interest tag, along with a 79.9% Fed stake, Greenberg, instead proposed the following in his letter filed October 13, 2008 with the SEC:
"The terms of the Credit Facility and preferred stock issuance could be amended into a “win/win” as follows: · The government would acquire non-voting preferred stock in AIG that pays a 5 or 6 percent annual dividend. This would be a respectable spread over the cost of money to the Federal Reserve.
· AIG would have the right to redeem the preferred over a period of 10 years at a 10 percent premium.
· Such a plan would have an immediate impact on the market and would save AIG from being liquidated. The United States would retain a great company, jobs would not be lost, share value would increase, and sales of assets could be undertaken in a more orderly fashion than what is currently contemplated.
· If need be, AIG would raise third-party funds, and could ultimately have a Rights offering at a time when markets are more stable and the sale of assets, as indicated, could take place in an orderly manner."