Tuesday, September 16, 2008

AIG Bailed out for $85 Billion

It looks like the deal is $85 billion in exchange for an 80% stake in the company.

Sources said the loan, which will allow AIG to avoid bankruptcy, will be secured and include incentives for quick asset-sales by AIG.

The deal severely dilutes existing shares of the company.

Management at the firm will be fired as part of the deal.

If it is anything like the Fannie/Freddie Bailout then the equity will probably be wiped out by the deal. I was seriously considering buying some AIG Puts on Friday but I didn't pull the trigger. Too bad because it would have been some quick profit. In any case the stock market will live another day. I think we can call this the bottom since there are only 2 Investment Banks left (both are actually still in the black) and the biggest US Insurer is now on government life support.

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