Saturday, May 26, 2012

AIG - Sources of Cash

This is not particularly subtle or controversial. The only 'news' is that I am predicting that AIG will recover the principal from the ML III sooner than some may expect.  AIA is fairly certain regarding timing and amount -- the $7 billion based on current market prices.  ILFC is the least certain regarding both amount and timing. All the figures are intended to be conservative with respect to amount.

Strictly from these sources, AIG would be able to buy about a quarter of its shares at $29/share by September 4th of this year using only the $12.6 billion.

My personal guess is that AIG is more likely to buy at least half of the Treasury stake of 1.08 billion shares, with the rest sold in a public offering by early September. This would assume that the financial markets stabilize by then. Under more difficult financial conditions, this process will take longer.


1. ML III - See earlier posts.
2. AIA - based on AIG ownership of 18.6%, Market Cap of 300 billion HKD, and an exchange rate of 7.76.
3. ILFC value selected based on book value (7,630,639 @ March 2012)


milessoldier said...

Thanks again for keeping us updated as I always say many have no idea that AIG is making such progress.

cap vandal said...

It will be interesting to see the FRBNY's strategy in selling assets. Looks like the markets are digesting a couple of billion per week.

Ron Taylor said...

Yea there certainly seems to be demand and as you point out at a couple of billion a week. All parties are motivated. Cheers

Ron Taylor said...

I would be interested in what you think of the comment made by Tinkinvestor on the AIG message board.

The split is 2/3 New York Fed and 1/3 AIG. In addition AIG will get their $5 billion they put up for equity stake back. My best guess is total they get back will be about $9 billion. There is about $12 billion left to auction. The amount owed still has not been updated. It should all be paid back with the Credit Swiss buy and Citibank’s buy.

Ron Taylor said...

More comments on Maiden lane

My point is these are being sold now for much higher than the amount of face value given by the Fed. This is why Maiden Lane III is about paid off and still shows about $15 billion more to be auctioned off. This could not happen unless these were sold for much greater value.

cap vandal said...

This is all shown in detail in my prior two posts.

A lot of discussion confuses face value with fair value.

In my opinion, the fair values used in the FRBNY reports is solid, but a little low.

There are mezzanine CDO's in the mix, so any idea that they will all sell for 70% of face value is uninformed. The junkiest stuff is likely close to worthless.

Ron Taylor said...

Thanks I notice some of the analysts are starting to realize how much cash AIG can accumulate over the next few quarters