AIG to sell assets including aircraft leasing

Business Materials 15 September 2008 03:59 (UTC +04:00)

American International Group Inc, left with deep financial scars from losses on guarantees it wrote to cover mortgage-linked securities, is expected to sell off assets, including a profitable aircraft leasing arm, the Wall Street Journal report on Sunday, reported Reuters.

AIG (AIG.N) is under pressure to sell off some of its most valuable assets in a bid to quickly shore up capital.

Those involved in a widespread review of the company and how to fix its deepening financial problems, are working around the clock, said a source familiar with developments.

The Wall Street Journal, on its website, said AIG could hold a call with investors as early as Monday morning. The company did not confirm those plans.

"We are considering a broad range of options," said Spokesman Nicholas Ashooh.

The company is working feverishly after posting $18 billion in cumulative losses stemming from mortgage investments in the past three quarters.

Its shares were nearly halved over the last week and the stock closed down 31 percent on Friday at $12.14. That was a level not seen in nearly 16 years and a fraction of the $100 the shares fetched in 2000.

"Clearly the stock price has been falling, so they need to do something," said Bill Fitzpatrick, an analyst at Optique Capital Management.

But Fitzpatrick did not think AIG was in the same boat as other Wall Street firms. Lehman Bros Holdings Inc (LEH.N) was on the brink of a meltdown on Sunday and Merrill Lynch & Co Inc (MER.N) reportedly in takeover talks.

"I just don't think that company is in anywhere near as bad shape as the market thinks it is ... Hopefully, this (asset sales) will go a long way to restoring some confidence in the company," Fitzpatrick added.

While the company has yet to disclose what parts of the business will end up on the sales block, AIG's highly- profitable aircraft leasing arm, International Lease Finance Corp, is expected to be top on the list.

Bank of America analyst Alain Karaoglan estimates the business could fetch up to $14 billion, which would go a long way towards the $20 billion some analysts say AIG will need to add to its coffers.

A decision to sell off the aircraft leasing arm would represent a 360-degree turn since late June when AIG Chief Executive Robert Willumstad said ILFC would remain part of the AIG stable.

ILFC, founded in 1971 and later bought by AIG, has been able to establish itself as industry leader because its funding costs were much lower than some rivals as long as it could piggyback off of its parent company's strong ratings.

But with AIG's ratings cut in recent months and at risk of being slashed further, that benefit has been eroded.

Standard & Poor's put AIG's ratings on negative watch on Friday, indicating a downgrade is possible, citing concerns over the stock's decline, and an increase in credit spreads, debt and potential access to capital markets becoming constrained.

ILFC ratings are also under review, S&P said.

ILFC did not return a call seeking comment on Sunday.

Citigroup analyst Joshua Shanker, in an earlier research note, named Transatlantic Holdings, a reinsurance business, as another asset AIG could sell and said other firms might make a better home for AIG's consumer lending and variable annuities businesses.

AIG might also get a good price for selling its stake in top Chinese property insurer PICC, according to a research note by Atlantic Equities analyst Alan Devlin last week.