Maurice Greenberg, the former chairman and chief executive of American International Group, has written his old company urging management to renegotiate their $85 billion government loan, saying its current terms will destroy the firm.

In a letter filed with the Securities and Exchange Commission, written to AIG's current CEO, Edward Liddy, Mr. Greenberg attached a “plan to save AIG.”

As Mr. Greenberg calculates it, AIG's $85 billion federal loan “carries an actual interest rate in excess of 14 percent, and on top of that, the government receives 79.9 percent of the ownership of AIG.”

He added that “bottom-line, this means that AIG cannot pay off this loan from the proceeds of selling assets in this market, nor can it pay the annual interest rate from earnings.”

Mr. Greenberg warned that as a result, “thousands of jobs will be lost, pensioners will lose their savings, and millions of shareholders will be disenfranchised. It is a lose/lose plan.”

However, he added, “if the loan were changed to non-voting preferred stock, with an approximately 5-to-6 percent dividend and a 10-year right of redemption for AIG at a 10 percent premium, this could be turned into a win/win situation.”

His plan stated that AIG at a minimum should be “afforded the same borrowing terms as other companies.”

He noted that since the loan was arranged, the Federal Reserve has stepped up direct lending to scores of financial institutions, and for the first time last week to non-financial institutions that are able to borrow on “terms far less onerous than those imposed on AIG…”

Mr. Greenberg's AIG stock holdings, now estimated at $1 billion, were said to be about $20 billion when he left the company amidst an accounting scandal in 2005, with allegations that finite reinsurance deals were misused to artificially bolster the company's balance sheet.

Special Reports /

Greenberg Says AIG Loan Terms Will Kill Company

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