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October 14, 2008 at 11:45 AM
American International Group Inc. should try to renegotiate the credit facility agreement it has arranged with the Federal Reserve Bank of New York.
Maurice Greenberg, a former chairman of AIG, New York, who continues to be a major AIG shareholder, makes that argument in a letter sent to current AIG Chairman Edward Liddy and also submitted to the U.S. Securities and Exchange Commission.
AIG has had to pay a 2% one-time commitment fee for the $85 billion New York Fed credit facility along with a 14% annual interest rate, and it must pay 8.5% of the available amount each year whether it uses the credit facility or not, Greenberg writes in the letter.
“Consequently, the loan carries an actual interest rate in excess of 14% and on top of that, the government receives 79.9% of the ownership of AIG,” Greenberg writes. “Bottom-line, this means that AIG cannot pay off this loan from the proceeds of selling assets in this market, nor can it pay the annual interest rate from earnings. As a result, thousands of jobs will be lost, pensioners will lose their savings, and millions of shareholders will be disenfranchised.”
Greenberg asks whether any winners have emerged from the current arrangement.
