Some of American International Group’s (AIG) shareholders want to help the company pay off the federal government’s US$85 billion loan and avoid ceding a majority stake in the company, the Wall Street Journal reported on Friday.
The shareholders are considering raising money, which could include bringing in other investors, according to the story on the Journal’s Web site, which cited a person familiar with the matter.
AIG, one of the world’s largest insurers, teetered on the brink of collapse early this week as it looked for fresh cash to help shore up its balance sheet, which was facing a liquidity shortfall amid the continued downturn in the credit markets. On Tuesday, the Federal Reserve agreed to provide the New York-based company with the two-year, US$85 billion package in return for a 79.9 percent stake in AIG and the ability to remove senior management.
On Thursday, AIG named former Allstate Corp chief executive officer (CEO) Edward Liddy as chairman and chief executive, replacing Robert Willumstad, who took over the company in June.
The government’s acquisition is subject to shareholder approval, as AIG noted also on Thursday in a filing with the Securities and Exchange Commission. The filing did not disclose when a vote might take place.
The shareholders’ effort is aimed at trying to make sure the government is paid back quickly, so that it won’t need to take the stake, the Journal said.
An AIG spokesman did not have an immediate comment, and a spokesman for AIG’s largest individual shareholder, former CEO Maurice “Hank” Greenberg, declined to comment.
AIG shareholders have suffered severely, largely to losses linked to the mortgage market. Its stock has fallen more than 90 percent this year.
On Friday, the stock was up with the broader market, as the government outlined bold plans to help rescue banks from billions of dollars in toxic assets. A temporary ban on short selling also helped boost financial stocks.
New York-based AIG operates a range of insurance and financial services businesses ranging from property, casualty, auto and life insurance to annuity and investment services.
The company’s problems stem from the more exotic financial products it offers, including some that insure risky debt and bonds against default. The value of those instruments, known as credit default swaps, have deteriorated amid the downturn in the credit markets over the past year.
The swaps are essentially insurance coverage to protect investors against defaulting bonds or debt.
For the three quarters ended in June, AIG lost about US$25 billion in the value of credit default swaps.
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