Dealbreaker this morning reported that Berkshire Hathaway/Warren Buffet could be interested in backstopping AIG.
Then I got an unfounded tip suggesting that AIG had hired a law firm to advise it on filing for Chapter 11. (Just in case of a freak accident, Equity Private has laid out a discussion of the possibilities)
But at last, the truth. At around 1pm, Governor Patterson agreed to let AIG access $20 billion of capital from its insurance subsidiaries. That’s half of what it needs. To make up the difference, it could also divest its domestic automotive business, its annuities unit, its aircraft-leasing arm, and AIG’s International Lease Finance Corp.
Not mentioned are the firms private equity subsidiaries, which are on both the LP and GP side of things. I’m under the impression the only use these holdings have to saving AIG is in their liquidation — AIG needs $20 billion more, and the firm’s private equity holdings are worth around $29 billion.*
The reason for the rule-bending by New York State? AIG employs many, many New Yorkers (State and City). So I guess the headcount-saver rule doesn’t apply to the thousands of Lehman employees… AIG is still seeking (and not yet getting) help from the Fed as well.
Its not over, or even close to over for AIG, but this is a good sign. Its shares even rebounded on the news. But does this indicate that KKR and TPG needn’t have been so skiddish on their potential AIG backstops? Probably not. If AIG can’t get any federal assistance (its not regulated by the Fed, so its not *as* deserving except in extremely desperate times), we may see AIG’s investment business as the next in line for divestiture.
*Note: They wouldn’t sell for that much.