Wednesday, September 17, 2008

The AIG Yardsale Might be Good for Uncle Sam

Hmm it seems that Uncle Sam may be a pretty prudent investor judging by some of the stuff AIG has to sell. The government loaned AIG $85 billion over two years at 11.5% interest which they get to borrow for 3.4% in exchange for the right to buy 79.9 percent of the company.

One unit that analysts said will likely be sold is the International Lease Finance Corp., which leases out more than 900 aircraft with asset values topping $44 billion at the end of the second quarter. This division has been a moneymaker for AIG, tallying $873 million in operating income in 2007 and $555 million in the first half of this year, according to securities filings.

Another possibility for sale is AIG's foreign life insurance business, with profits of $1.5 billion in the first half of this year on top of earnings of $6.19 billion in 2007. Gary Ransom, an analyst with Fox-Pitt Kelton, pegged the value of that business at as much as $50 billion.

I would love to be able to borrow money at 3.4% and then lend it out at 11.5% to a company that would be able to get up to $94 billion from selling just 2 profitable units. Crazy Hank Paulson says "Everything at AIG Must Go-go-go!"

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