New York — Former
In a letter filed with the
“As you know, AIG is in crisis,” Greenberg wrote. “The loan from the Federal government to AIG, as it is currently structured, will result in the liquidation of AIG, the loss of thousands of jobs, and the irretrievable loss of billions of dollars in shareholder value.”
Greenberg expressed doubt that the company could repay the loan, which is for a two-year term and carries approximately a 14% annual interest rate. The deal also gave the government 79.9% ownership of AIG.
“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,” he wrote. “As a result, thousands of jobs will be lost, pensioners will lose their savings and millions of shareholders will be disenfranchised. It is a lose/lose plan.”
Greenberg proposed new terms, including a switch of government shares to non-voting preferred stock, with an approximately 5% to 6% dividend, and a 10-year right of redemption for AIG at a 10% premium.
Greenberg said subsequent moves to recapitalize other troubled financial institutions warranted a reworking of the AIG deal.
“Since the time the Credit Facility was entered into, the Federal Reserve has stepped up direct lending to scores of financial institutions and, for the first time last week, to non-financial institutions,” Greenberg said. “They are able to borrow on terms far less onerous than those imposed on AIG.”
Source: Securities and Exchange Commission
