AIG investors thrash out alternatives to Fed takeover

AIG investors thrash out alternatives to Fed takeover

London: Shareholders of the troubled American giant AIG are looking for private sector alternatives to save the company and prevent dilution of their holdings following US government’s $85 billion bailout package, media report says.

Investors, including representatives of former chief executive Maurice Hank Greenberg, are working out private sector alternatives to the takeover by the US Federal Reserve, UK daily The Telegraph stated.

Greenberg, who ran Manchester United sponsor AIG for 38 years and controlled an 11% stake, has seen the value of his holding dive by more than $5 billion in weeks.

Last Friday, AIG confirmed that the Fed would take a 79.9% equity stake in return for allowing the insurer to borrow up to $85 billion via a 24-month credit facility at rates of three-month Libor plus 8.5%. It has already drawn $25 billion, the paper said.

AIG said, “The corporate approvals and formalities necessary to create this equity interest will depend upon its form," implying investors may have no vote on the rescue, The Telegraph reported.

Greenberg has claimed that AIG might have avoided the Fed takeover if it had taken out a bridge loan, sold assets and raised fresh capital. “How can it be the right move if shareholders lose 80% of their equity?" he asked.

David Boies, Greenberg’s attorney, said lawyers acting for other investors had contacted him about the meeting. AIG’s leading shareholders include Axa, Dodge & Cox, Davis Selected Advisers and Legg Mason.

However, Fidelity, another top investor, did not attend, the paper said.