KaktusJones : AIG Taps $82.9 Billion, Two-Thirds of its Federal
AIG Taps $82.9 Billion, Two-Thirds of its Federal Credit Line
By Hugh Son
Oct. 17 (Bloomberg) -- American International Group Inc., the insurer struggling to repay government loans by selling businesses, has already tapped two-thirds of its $122.8 billion Federal Reserve credit line.
AIG, once the world's biggest insurer, has borrowed $82.9 billion in the month since it agreed to a U.S. takeover, the Fed said yesterday, up from $70.3 billion a week ago. The insurer agreed yesterday with New York Attorney General Andrew Cuomo to halt a $10 million severance payment to outgoing Chief Financial Officer Steven Bensinger. It promoted David Herzog to CFO to oversee the plan to pay off its debt.
Analysts including David Havens of UBS AG have expressed doubt that Chief Executive Officer Edward Liddy can garner enough from selling units to repay the government loan. This week is the first that AIG's borrowing included money from both the $85 billion credit line extended last month to stave off bankruptcy and another $37.8 billion made available by the Fed on Oct. 8, said company spokesman Nicholas Ashooh.
``We've got a plan that will allow us to repay the Fed loan and emerge as a strong international property-casualty insurer with a presence in international life insurance,'' Ashooh said.
AIG intends to sell units including U.S. life insurance, plane leasing, consumer finance and asset management, Liddy said Oct. 3. Yesterday Liddy agreed to cancel unnecessary junkets and perks and to help Cuomo potentially retrieve pay awarded to ex- CEO Martin Sullivan and Joseph Cassano, former head of AIG's financial-products unit.
The insurer ended a five-month executive search that began in May when then-CEO Sullivan moved Bensinger from CFO to vice chairman after a record first-quarter loss.
Herzog, 48, will work to reduce expenses at the insurer, which was criticized by lawmakers for spending $440,000 on a retreat at a California resort after the takeover. AIG was forced to take the government loan after three quarterly losses totaling more than $18 billion tied to the U.S. housing market.
Herzog, who was AIG's comptroller for three years, will ``assume a central role in overseeing AIG's plan to address its capital structure and pay down the credit facility'' from the U.S., AIG said yesterday in a statement.
AIG pays 8.5 percent annual interest plus the 3-month London interbank offered rate on money it draws from the two-year $85 billion loan. Three-month Libor dropped to 4.50 percent yesterday.
Last week AIG said it would also be allowed to swap as much as $37.8 billion of its ``investment-grade, fixed income securities'' with the government for cash to address a liquidity squeeze caused by the insurer's securities-lending program. The firm lost money on investments made using collateral from securities it loaned to third parties, requiring the difference to be made up.