New York – In the week following the largest bailout in the financial services industry, New York-based
Last week the government agreed to lend AIG up to $85 billion to help it avoid bankruptcy in exchange for a right to take a controlling stake in the giant insurance conglomerate.
Hurdles to these shareholders' efforts could be high, reports American Banker, as they—and other investors they may recruit—would have to put up significant sums.
The shareholder group wants to make sure the government gets paid back quickly so that it will not need to take the stake, the person said. This could be accomplished through asset sales that the company is planning and possibly through investments in AIG by large investors such as sovereign wealth funds. The approach could be more beneficial to shareholders than the government deal because it would inject capital in exchange for equity. The government, by contrast, would get equity in exchange for its loan.
Edward Liddy, who was named AIG's chief executive last week as part of the arrangement with the government, said he had no knowledge of the shareholder effort and had no comment. AIG's stock price has fallen more than 90% this year, largely because of losses linked to the mortgage market. The government acquisition is subject to shareholder approval.
Meanwhile, Liddy’s predecessor, Robert Willumstad, has refused $22 million in severance pay from his former employer. Willumstad, who has served on AIG’s board since 2006, found himself at the helm in June, 2008, replacing CEO Martin Sullivan. In a note to his successor, Willumstad is reported to have said he was refusing the pay because he believed he was unable to execute his own restructuring plan.
But across the globe, the reverberations of last week’s shakeup are still being felt. On Friday, Mark O’Dell,
"We are satisfied with the ability of the company to carry on business as usual and to meet new demands even when there are any changes in management," said Monetary Authority of Singapore executive director of insurance supervision Kwok Mun Low in a statement. "MAS's regulatory oversight of AIA and all insurers in is rigorous," said Low. "We urge policyholders not to act hastily to terminate their insurance policies as they may suffer losses from the premature termination and lose the insurance protection they may need."
Sources: American Banker, Clusterstock.com, Tradingmarkets.com