AIG Restructuring

I was happy to read this AIG Restructuring piece in the Financial Times. AIG is expected to report a loss of 60 billion dollars this Monday. If a company that has taken government aid twice in the last six months – reports the biggest loss that any company has ever reported – then it is time to recognize that it is too big to save.

Under the plan – the government (which already controls 80% of AIG) will split AIG into three divisions and then try and sell off the individual parts.

These three pieces will be:

  1. AIG’s Asian Operations
  2. AIG’s International Life Insurance Business.
  3. US Personal Lines Business.

There can be an additional fourth unit, which holds the toxic assets and all other troubled businesses on AIG’s balance sheets.

In any such deal the government will have to take a hit on its shares and debt that it has recently issued to AIG, but at least such deals are clear to understand and promise much more than the financial accounting type of deals that were in the news – related to Citi.

The other good bit about this is that the government will be able to re-brand Bank Nationalization as Reprivatization and make the bank deals more palatable to people.

For once, I am looking forward to a Monday.

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