AIG planning sale of parts to pay debt

CHARLOTTE, N.C. | The insurer American International Group Inc. said Friday it plans to sell off some of its businesses to pay off its massive government loan.

The plans, expected by Wall Street, drove up AIG’s shares 5 percent in afternoon trading. But it now leaves investors wondering how much AIG will be able to raise from the sales.

On the brink of failure last month, AIG was bailed out when the government offered it an $85 billion loan during the credit crisis that saw Lehman Brothers Holdings Inc. file for bankruptcy protection and the sale of Merrill Lynch & Co. to Bank of America Corp. In return for the loan, the government received warrants to purchase up to 79.9 percent of AIG.

Shortly after the deal, newly appointed Chairman and Chief Executive Officer Edward Liddy said he planned to quickly raise funds through asset sales, but hoped to hold on to as many of AIG’s insurance operations as possible.

AIG, one of the world’s biggest insurers, Friday didn’t specifically disclose all the assets it would sell or the expected revenue from the sales. However, the New York insurer said it plans to retain its U.S. property and casualty and foreign general insurance businesses, and also plans to retain an ownership interest in its foreign life insurance operations.

So far, AIG has announced only one deal, a sale of its 50 percent interest in London City Airport to its partner in the venture, Global Infrastructure Partners. It bought the stake as a joint venture with the private-equity fund in 2006 for a total price estimated at $1.4 billion.

Mr. Liddy, former CEO of Allstate Corp., said AIG has been contacted by “numerous” parties regarding possible sales of other businesses, and AIG will try to sell its operations to “brand-name” buyers who have strong ratings and balance sheets.

“Our goal is to emerge from this process in a timely fashion as a smaller, but more nimble company that is solidly profitable and has attractive, long-term growth prospects,” Mr. Liddy said in his first call with investors and analysts. “I think what the Federal Reserve has provided us has been very generous.”

Problems at AIG did not come from its traditional insurance subsidiaries, but from its financial services operations - primarily its insurance of mortgage-backed securities and other risky debt against default. AIG’s traditional insurance subsidiaries have widely been viewed as safe.

As of Sept. 30, AIG had drawn $61 billion on the credit facility, of which about $54 billion has gone toward its securities lending and AIG’s financial products area. The rest of the money has been for other liquidity needs amid an “unprecedented” freezing of credit markets, Mr. Liddy said.