Former American International Group chief executive officer Maurice "Hank" Greenberg has called on AIG management to enter the company in the federal bailout program while the company continues to rework its debt through additional borrowing.
A filing with the Securities and Exchange Commission disclosed today that Mr. Greenberg wrote AIG CEO Edward Liddy, urging him to take advantage of the federal Troubled Assets Relief Program to find better credit terms and avoid a forced fire sale of company assets.
Mr. Greenberg painted a bleak picture of the company that, he said, is having trouble keeping accounts and is losing employees.
He said the value of assets is declining and "the crippling combination of declining asset values and extremely poor market conditions make it difficult to consummate any sale of assets at an acceptable price and on a timely basis."
Converting the current $85 billion government loan to the TARP program, Mr. Greenberg wrote, would allow a large portion of the original facility to be repaid and redeployed elsewhere in the financial system with no loss to the American taxpayer.
He also said that stakeholders in the New York-based company would be treated no better or worse than anyone else. Under the current lending program, he said, almost all stakeholders stand to lose.
Both AIG and the federal government want to see a beneficial outcome, noted Mr. Greenberg, but the current program "offers little hope of that happening." He said Mr. Liddy's prompt action is needed to make the necessary change.
Yesterday, in an SEC filing, AIG said it applied for participation in the Federal Reserve Bank of New York's Commercial Paper Funding Facility to borrow $20.9 billion. The borrowing does not apply to any of the company's insurance units.
The money would be used to meet working capital needs, refinance outstanding commercial paper as it matures, and make voluntary prepayments on the $85 billion credit facility it has with the Federal Reserve.
The commercial paper has friendlier term rates than the current federal facility, where AIG is paying more than 8 percent annual interest. With the commercial paper, the loan rate is reportedly at less than 2 percent.
The company has not drawn all of the money available to it under the credit facilities, said AIG's spokesman Joe Norton.
As of Wednesday, he said a Federal Reserve report showed AIG borrowed $83.5 billion. Of that, $65.5 billion belongs to the $85 billion federal government loan, plus $331 million in interest and fees. The company has also drawn $17.7 billion from a $37.8 billion government credit facility arrangement.
The current borrowing does not include the commercial paper request, he said.
Voluntary prepayment on the $85 billion federal loan does not reduce the revolving line of credit. When AIG makes a payment based on an asset sale, that payment reduces the available credit facility, he said.
Concerning Mr. Greenberg's letter, the company has no comment, Mr. Norton said.
This article updated at 11:32 a.m.
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