AIG seeks up to $75bn from Golman Sachs and JPMorgan

by Gill Montia

Story link: AIG seeks up to $75bn from Golman Sachs and JPMorgan

Reports that American International Group Inc. (AIG) had approached the Federal Reserve for a $40 billion loan have been followed by the news that the insurer is now seeking up to $75 billion of support from investment banks, Goldman Sachs and JPMorgan.

According to Bloomberg, the Federal Reserve has urged AIG to seek private capital to resolve its funding difficulties.

The company has been hit hard during the credit crisis by losses on its portfolio of securities backed by sub-prime mortgages.

In the second-quarter of 2008 it posted a net loss of $5.36 billion. The result followed on from a $7.81 billion net loss in the first-quarter of the year, after writing down $13.1 billion in sub-prime and other investment losses.

Credit Suisse recently predicted that further mortgage writedowns could result in a $2.41 billion loss in the third quarter of the year.

Credit rating agencies Fitch and Standard and Poor’s have cut AIG’s long-term credit rating and the group may be forced into a sale of assets.

In the meantime, US regulators are allowing AIG to borrow $20 billion of capital from its own subsidiaries to keep the group afloat.

AIG had global revenues of $110 billion in 2007 and employed 116,000 worldwide.

Its subsidiaries include one of the world’s largest aircraft leasing businesses, International Lease Finance Corp., which has a fleet estimated to be worth $50 billion.