Way back in 1998, AIG invested $150 million for a 7% stake in Blackstone Group. The stake was set to grow to $1.35 billion over a long period of time.
Nine years later, that stake grew to nearly $2 billion, the AP reported when Blackstone went public last summer. Separately, AIG had agreed to commit around $1.2 billion in various Blackstone funds.
The point was to formalize AIG’s relationship with the fund via former AIG CEO Hank Greenberg.* Now Greenburg has been ousted at AIG (replaced by a buyout pro no less), and the insurer may need to liquidate its stake as it scrambles to find available liquidity.
Ironically, the same 1998 press release that announced AIG’s investments in Blackstone also announced a termination of a longstanding LP relationship, triggered by a different financial crisis. Blackstone lost its commitment from Nikki Securities of Japan thanks to the tough market in Tokyo in the late 90s.
And it’s already been suggested that AIG could raise part of the cash by selling its investments in Blackstone Group. Dow Jones reported that AIG’s stake in Blackstone is worth $700 million, and its investments in Blackstone’s funds equate to around $1 billion. It could sell those in the secondary market (could it be at a loss, considering Blackstone’s slow go at raising its latest fund?).
Even if sold at a premium (good luck), these holdings would be a very small part of the $20 billion it needs. Still, every little bit helps.
Dow Jones also connects a few important dots:
It isn’t clear whether AIG has buyers lined up for any of the assets it wants to sell. Also unclear is how much interest private-equity firms would take in an AIG investment and whether they have enough capital to make a dent in AIG’s problems.
*Greenberg sat on Blackstone’s advisory board. He’s gone now, but the relationship is obviously still strong, as Blackstone is advising AIG on its restructuring.