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Leading American Insurer AIG close to bankruptcy
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by Sanjay Jha | September 15, 2008 at 11:56 pm
628 views | 54 Recommendations | 6 comments
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Leading American Insurance company American International Group Inc. is in the bad shape and likely to file for bankruptcy. However they have been allowed to use $20 billion of assets held by its subsidiaries to provide cash needed for the troubled insurer to stay in business.
World's largest insurer is in deep trouble after one of its unit dealing in complex debt securities and derivatives have got into problem and needed to be bailed out. It could need billions of dollars to strengthen its balance sheet. The Fed which only deals with Bank could not provide the USD 40 billion bridge loan because there is no provision for dealing with insurance companies.
In the continuing meltdown in the US financial market, World's largest insurer, American International Group (AIG) was on Tuesday downgraded by credit rating agencies and was racing against time to find a multi billion dollar infusion to stay afloat.
Federal reserve officials and two leading banks, JPMorgan Chase and Goldman Sachs, were negotiating to put together USD 75 billion package to save the insurance giant to stave off crisis.
AIG has has sought USD 40 billion in bridge loan to stave off the crisis. But the Feds rebuffed the request and the Wall Street Journal reported that unless funds were forthcoming AIG too might follow Lehman Brothers in declaring bankruptcy which could add to the meltdown of the markets.
AIG's ills came to fore, when three leading credit rating agencies -- Standard and Poor's Moody's and Fitch -- lowered the company's credit scores.
The downgrades, financial analysts said would make things difficult for AIG and the New York Times said it would force the company to turn over billions of dollars in collateral to its derivatives' trading partners.
In the face of uncertainty, shares of AIG plummeted more than 60 per cent on Monday and the Times quoted two people briefed on the situation as saying that the company's potential write offs are mounting and may reach USD 60 billion to 70 billion.
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Sanjay Jha
New Delhi, India
Most RecentMost Recommended Comments (6)
at 04:08 on September 16th, 2008
Sanjay Jha, I like this story. It's good stuff. New York State Governor Paterson bailed out the AIG. See: http://www.nowpublic.com/world/wall-street-20-billion-dollar-bail-out-aig
at 04:26 on September 16th, 2008
Sanjay Jha, I like this story. It's good stuff. "AIG close to bankruptcy", I agree"
at 04:32 on September 16th, 2008
It will be interesting to see how the US markets react to this. Will they be surprised at the 20 billion injection and rally or will they see this as a failure to keep them afloat in the long run?
at 08:31 on September 16th, 2008
AIG is not sufficiently scary for the NYSE, up at the moment. Maybe they didn't invest in their own stock. $4 a share
at 05:58 on September 16th, 2008
Sanjay Jha, I like this story. It's good stuff.
at 06:33 on September 16th, 2008
Sanjay Jha, I like this story. It's good stuff. They are being bailed out and I think it is a waist of money to help them, that money should be invested into the people not those Sharks.