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American International Group, Inc. Message Board

  • vijayraptor vijayraptor Feb 28, 2010 1:38 PM Flag

    updates on aig debt situation

    'As of the end of 2009, AIG had drawn upon $46.9 billion in funds from Treasury and currently owes $25.3 billion under a credit facility from the Federal Reserve Bank of New York'

    TOTAL DEBT = 46.9+25.3= $ 72.2 BILLION

    With the potential aia prudential sale, aig keeps anything above 16 billion to repay further debts, and the same applies to metlife as anything after 9 billion, aig keeps to pay down debt as well.

    aia sale (36 billion- 16fbny= 20 billion)
    Metlife (15 billion-9fbny= 6 billion)

    Also 2 billion from the sale of nan shan (awaiting approval from taiwan regulators) + asset sales in 2009 and 2010 = $5.6 billion of net cash.

    So lets see where we are boys and girls:

    72.2 billion (debt) - 20b-6b-5.6= 40.6 billion in outstanding debt.

    I suspect that the fbny debt will be paid down as much as possible, but some may make thier way to the treasury (which is interest free)

    Aig has 5 billion invested in the maiden lane portfolios, which they get back if they are able to generate a profit in the future (not sure when they can extract this), along with other asset sales mainly the airline leasing division which by some estimates is worth 5-10 billion.

    Eitherway by the end of this year aig will have about 40 billion in debt (interest free) and three core divisions of international property casualty, domestic life and retirement insurance and a financial products division. 2/3 of the divisions are generating an operating profit.

    I fully expect that chartis will return to profitability in 2011, all in all, aig's core divisions should generate 10 billion in profit a year in 2011 which should reduce thier debt further. This is inline with the statements made by Benmosche recently.

    Not out of the woods by any means, but substantially better position than where aig was 6 months ago.

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    • mikaelviita Mar 7, 2010 10:53 AM Flag

      I recently purchased a comprehensive assessment report on AIG. Based on the closing price od $23.77, assuming the company made 8,8% profit per annum, it would take 85 years before the stock would be worth that much. The report valued the current price of the stock for less than $-750.00.

    • VIJAY,Encouraging for sure,I believe the $40 plus range can be revisited just on your remark of being in a better position. The economy imo is extremely bleak and insurance companies are usually the first to suffer and that is real caveat. If the economy shows any sign of life, AIG should lead the way back but that is very doubtful given the continuing loss of AMERICAN jobs and very few new ones to offset. Another real problem is that many of those that are created will end up overseas when it becomes cheaper to do so. Building and infrastructure are really not affected but just about everything else is. T

    • right on westchester- I could not agree more. vijayraptor seems to be overlooking a lot of debt- certaintly not all the debt mentioned by Reuters "The two companies are expected to fetch about $50 billion overall, which could allow AIG to pay down almost all of its Federal Reserve Bank of New York credit facility.

      But that would still leave the government holding roughly $47 billion in equity investments, including the amount drawn under a $30 billion equity line, and a nearly 80 percent stake in AIG, to which it has committed up to $182.3 billion in taxpayer funds."

      • 1 Reply to lary5449
      • lary, yes there would be about 47 billion through a treasury stake, but that is non -culmative and requires no interest or dividend payments. Only 3 billion has been drawn down on the equity line. So about 47 billion. I agree.

        Aig can operate as business as usual as this treasury line is interest free and 2/3 of aig's divisions are generating an operating profit.

        The stock already trades below $32 which is the book value that accounts for the eventual government dilution.

        The 183 billion in taxpayer funds are formed as maiden lane investments and unused credit lines.

        Your post seems to suggest that aig owes 183 billion, which is misleading.

    • if someone of your mental acuity, mr dell, thought I was credible, then I would know my posts here were not achieving their purpose.....

    • Look who is talking, who lost all the credibility on this board. Forgot about other's ass, think about just you, yes yourself before you start crying (cyao).

    • short the common here will be suicidal. It can double or triple and you will lose money on the short side more than what you can gain on the debt

    • vijay, I'm trying to understand if this is a good buy. From your excellent post I would say that AIG is almost out of the storm. My question is: shouldn't this be reflected in a much higher pps?

      • 1 Reply to brunodc
      • From the following article, it seems clear that liabities still exceed assets, leaving nothing for shareholders.

        "The sale is another step in AIG's ongoing attempt to restructure its business, become profitable and repay the government. Exactly how it plans to do that remains unclear.

        The AIA deal will give AIG $25 billion in cash and $10.5 billion in securities. The cash portion would allow AIG to pay back nearly 20 percent of the almost $130 billion in bailout funds that are outstanding. Together with an anticipated sale of American Life Insurance Co., or Alico, to MetLife Inc., the sale could net enough to eventually cover the Federal Reserve Bank of New York's $47.9 billion investment in AIG.

        AIG debt to the government also includes $47.3 billion owed the U.S. Treasury and has $34.5 billion in outstanding assistance tied to the value of investments the New York Fed bought to prop up AIG.

        A Treasury official who spoke on condition of anonymity said it's not yet clear whether all the taxpayer money will be returned. The official asked not to be identified because plans for AIG's future are still being developed.

        Many analysts are skeptical that all the funds will be returned.

        "It's probable we are not going to get our money back," said Morningstar analyst Bill Bergman. "There's a sense of lost confidence that has affected business operations as well as their value in the market place."

    • Interest free debt? Really? And whats the maturity of that $40B? WIll they be able to pay it off or roll it over? Also wonder, what about the other $113B in debt on the balance sheet? Does that magically go away too?

      • 2 Replies to Buy_Sell_or_Hold
      • 'It also appears from GAO reports that earlier this year Treasury changed the AIG preferred stock from “cumulative,” under which missed dividends must be paid at a later date, to “non-cumulative,” under which missed dividends need not be paid at all.'

        Senator Grassley letter to fed and nyfed.

        Read pg 14 of their latest earnings release and you will see under 'series E preffered stock' the dividend or interest is '0'

        Also read the forbes article which offers the best insight on aig's payment obligations:

        Treasury: The Treasury has struck two agreements with AIG. Under the first, the Treasury has $40 billion of preferred stock in AIG. Originally, this stock had a 10% coupon, but in April AIG cut a deal eliminating the dividend payment. AIG owes the Treasury an additional $1.6 billion of dividends from the time the coupon existed, but does not have further interest payments on these shares. That means they can take a long time paying the money back.

        The numbers qouted below are outdated and have changed but since AIA fetched 36 billion, but 'AIG currently owes the government about $86.8 billion. If it successfully spins off AIA and Alico, that burden is reduced to $61.8 billion. And $42.8 billion of that sum carries no interest or dividend payment.'

      • What other 113 billion in debt, money given consists of a line of credit untapped and maiden lane portfolios which are not debt.

        The interest on the $40 odd billion is non culmative. Meaning it can roll over each quarter.

    • Excellent post and information! Thanks for sharing the intelligence and knowledge. I sincerely believe that we will re touch $29 today when it was just there last week!

    • Great find.

      I was looking for latest debt numbers.

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