CNBC, The New York Times, The Wall Street Journal and other news organizations are reporting that American International Group Inc. has been scrambling to find capital.
AIG, New York, could sell valuable assets, get a short-term $40 billion “bridge loan” from the Federal Reserve Board, or take other steps to raise and reallocate billions of dollars in an effort to avoid a rating downgrade and to respond to demands for cash and collateral, according to news reports.
Members of the AIG board and officials from the New York State Insurance Department have been meeting with private equity firm representatives, representatives of other potential sources of capital, and officials from other agencies to come up with a response to an announcement that Standard & Poor’s Ratings Services, New York, issued Friday.
S&P placed its ratings on AIG and subsidiaries on CreditWatch with negative implications, noting that it wanted AIG to increase capital levels because of the increasing likelihood that AIG may have to pay cash to counterparties in connection with credit swaps involving AIG.
“This action follows a significant decline in AIG’s share price and an increase in credit spreads on the company’s debt,” S&P says in a discussion of the CreditWatch move.
The price of AIG shares fell 46% last week, to $12.14 Friday, and AIG shares now are selling for just $7.
S&P pointed out that AIG has suffered heavy losses over the past 3 quarters in connection with credit swaps that are insuring mortgage-backed securities.