How Much Is That Portfolio In The Window?

AIG’s private equity businesses will likely top the list of divestiture candidates that posses “the least possible disruption to the overall economy.” Seems to me the businesses I described on Monday would be easier to extract and slide into another FoF or PE manager’s portfolio. It made sense pre-bail-out; now it seems beyond clear.

Even so, insiders in the firm’s investment arm say they’d received no indication to slow down commitments (as of yesterday morning). In fact, AIG’s institutional investment arm have been going about business as usual. It made a commitment as recent as two weeks ago!

“But what about the news,” I disputed. AIG is desperate for cash, and the decline has been happening for months now. The federal helping hand wasn’t exactly expected, so why would they continue to let even one penny slip out the door?

The answer I got was not surprising. “No one knows what’s going on,” were the exact words, I believe. The company’s employees haven’t been told much of anything in regards to the AIG’s financial situation, let alone the fate of their particular piece of pie. “Either way, we’re still making money and making commitments,” the person said.  The capital in AIG’s investment funds has been committed and will not be negotiated out of. Even my suggestion that certain commitments might be sold in secondary markets was poo-pooed. Since the point of the bailout was to sell off assets more profitably, in a situation less distressed and hairy than bankruptcy, it looks more like the whole business—people and assets—will likely be sold.

Note: Looks like Bob Willumstad may have a little more free time on his hands back at Brysam Capital.
Sidenote: One party of thought blames this on Eliot Spitzer, saying if he hadn’t pushed out CEO Hank Greenberg, the company might not have tanked as dramatically as it did.