I don't think that some dilution is unavoidable. However, I wouldn't say this is something that needs to be avoided. Better to raise capital through private investors than to burden AIG with additional debt.
From another viewpoint, I would rather AIG be able to earn 8B in 2011 and have that money to work with instead of paying off some obligation...
We owe the treasury 49 BLN.A pool of banks could take a loan at the current rate which is very low, let's say at 0.25%, and turn the money to AIG at 1%.With that money AIG would buy back the preferred shares, and in echange they would get bonds we would pay back in 3-3 1/2 years.We have enough assets to liquidate and profit handover, but of course it would take that time, specially to pay them back with the profits,but that'll work.It would be better than dumping 2 BLN shares on the market, it would take years anyway and nobody would be happy. On top of it, insiders got plenty of securities, they will mind of pps.
Thanks. So it looks like the key is AIG buying the convertible preferreds? I am intrigued by the unfilled gap in the low $200s. The only way I see this being filled is if AIG can somehow avoid massive govt dilution. I believe 80% dilution is just due to the govt loaning money to the company via the preferreds.