AIG's Bad Asset Sale Put on Hold - Analyst Blog
May 21 2012 - 4:55AM
Zacks
The Federal Reserve Bank of New York (“Fed”) postponed the sale
of assets under the Maiden Lane III portfolio, acquired from
American International Group (AIG), as a part of
its strategy to rescue the company from a financial downturn.
However, Fed refused to disclose any reason for the delay.
A probable reason for putting the asset sale on hold could be
the requirement for greater transparency in the sale process by
other brokers and dealers. However, the asset disposal has impacted
the company’s share price, which is already on the wane.
Fed rendered BlackRock Inc. (BLK) with the
responsibility of auctioning off these assets. The participating
brokers and dealers were- Credit Suisse Group AG
(CS), Morgan Stanley (MS), Goldman
Sachs (GS), Merrill Lynch, the broker-dealer unit of
Bank of America Corp. (BAC),
Citigroup (C), Nomura Holdings
(NMR), Barclays Capital (BCS) and Deutsche
Bank (DB). The last date for submitting bids for assets
worth $1.67 billion was May 17.
Earlier this month, Fed announced the sale of 16% of AIG’s bad
assets valued at $7.5 billion to Barclays Capital and Deutsche Bank
for an undisclosed amount. Maiden Lane III portfolio was created in
2008 to provide AIG with $24.3 billion in cash. This was also a
part of $182 billion fund approved by the government as a bailout
for the company.
Fed conducted a number of auctions earlier this year to sell off
AIG’s assets, thereby shedding its residential mortgage-backed
securities completely. Recently, it sold TRIAXX collateralized debt
obligations, a part of the Maiden Lane III portfolio to Merrill
Lynch for an undisclosed price. Presently, AIG has $8.996 billion
in rescue loan dues, according to Fed and AIG filings.
The year has not been favorable for AIG given its vigorous asset
disposal program for repaying the government debt. Moreover,
despite raising funds in the past few quarters and repaying a chunk
of its debt, AIG is not yet flexible with respect to capital.
However, we expect the company to benefit from its scale of
operations and economic recovery.
AIG currently retains a Zacks #3 Rank, which translates into a
short-term Hold rating. We also maintain our long term ‘Neutral’
recommendation on its shares.
AMER INTL GRP (AIG): Free Stock Analysis Report
BANK OF AMER CP (BAC): Free Stock Analysis Report
BARCLAY PLC-ADR (BCS): Free Stock Analysis Report
BLACKROCK INC (BLK): Free Stock Analysis Report
CITIGROUP INC (C): Free Stock Analysis Report
CREDIT SUISSE (CS): Free Stock Analysis Report
DEUTSCHE BK AG (DB): Free Stock Analysis Report
GOLDMAN SACHS (GS): Free Stock Analysis Report
MORGAN STANLEY (MS): Free Stock Analysis Report
NOMURA HLDG-ADR (NMR): Free Stock Analysis Report
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