The long anticipated move out of AIG (NYSE:AIG), to offload its Asian subsidiary under full control by the United States Federal Reserve Bank of New York since the financial collapse back in 2009, has hit a rough patch. On Tuesday, December 1, 2009, AIG stated “the placement of its holdings in American International Assurance Company and American Life Insurance Company in special purpose vehicles will position the units for initial public offerings or third-party sales” as quoted directly from the Wall Street Journal. AIG has cut total government credit available to its financial stronghold to $35 billion from $60 billion, back in December 2009, as the New York Fed extended its credit facilities to AIG September 2008 to “rescue the insurer.”. In reducing its debt to the federal government, two units for spinoff and/or sale AIA and ALICO, enables the Federal Reserve Bank of New York to receive preferred interests in repayment of a portion of the FRBNY facility from AIG.
Atop an irresponsible reverse stock-split against shareholder value in June of 2009, AIG has been struggling to unwind its various subsidiaries since the beginning of the financial crisis in 2008, amidst crumbling financial markets and a worldwide liquidity crises. Prudential (LON:PRU) and AIA, has come to no avail for AIG quite yet, as Prudential’s decision to call off its acquisition of AIA on Wednesday June 02, 2010 placed a viable alternative for AIG to gain from this deal off the table. Reciprocally, Metlife Incorporated has been after the AIG insurer ALICO since February of 2009, and on March 8, 2010, MetLife announced the acquisition of the international leader life-insurance business ALICO from AIG. MetLife will pay approximately $15.5 billion for the deal, including $6.8 billion in cash and the remainder in equity securities. The price of the deal is expected to close by the end of 2010, and is still subject to closing adjustments. But the cards are not dealt completely for AIG quite yet on its AIA arrangement, as AIG accepts a five-year time horizon for its liquidity special purpose vehicle with the New York Fed, plus an initial public offering for AIA shares on an Asian exchange. So, AIG does not seem to be in a rush.
The question remains, what will come of this rough patch for AIG on a potential AIA merger with Prudential…
