Friday, May 18, 2012

Maiden Lane III - 18 May 2012

Federal Reserve Balances show the Maiden Lane loan balance has dropped from $7,962 to $2,768, as it looks like the FRBNY received cash from the MAX CDO sales and applied it to the loan balance.

Bids for the sale of $1.7 billion face value Duke Funding CDO's has been delayed, pending distribution of more information by FRBNY.

However, bids for the sale of $691 million of Putnam CDO's are still due on Tuesday 22 May, 2012.

The Treasury announced the delay as follows:

May 18, 2012
The New York Fed decided to postpone its auction of ML III's holdings in the Duke CDO after it became aware that there was additional information concerning the Duke CDO that had not been made available to the bidders.  The New York Fed's auction of ML III's positions in the Putnum CDO is proceeding as announced on May 11.
If the net sales price on the roughly $4.9 billion of securities sales which have not yet been either announced (TRIAXX) or completed (Duke Funding, Putnam), is in the low 70% range, this should be enough to fully pay down the principal and accrued interest on the FRBNY loan:

As far as the assumption that the cash sales prices will be close to $3.5 billion, the TRIAXX CDO's were recorded at 31 December 2011 at a fair value of about 71% of face value. Given that the press releases have commented favorable on pricing, it does not seem unreasonable to assume that the final results will be around 70% or more. 

Payment of the Principal and Accrued Interest on the FRBNY loan will provide the basis for a nice headline when they are finally announced. 

Of note is that the estimated AIG recovery from Maiden Lane III or $7.6 billion is 16% of AIG's market cap @ $28/share (closing price on the NYSE, 18 May is $28.33). Although there is an argument for focusing on variances in results in the ongoing businesses, assets for sale, including stakes in AIA and the Aircraft Leasing business make up over 40% of AIG's current market value and are subject to material fluctuations which may be positive. 



Ron Taylor said...

Thanks for updating this as I personally have yet to get
my head around all these sales and their significance.

What I do know is very few are paying attention to this and it is their loss.

To many AIG will seem to have transformed itself over
night. Cheers

cap vandal said...

The FRBNY posts ALMOST everything you need to know.

There are some lags, but it is amazing to me just how lazy the financial press is regarding keeping up with the actual economics of this SPV.