AIG is taking issue with this morning’s report from the Journal that it has a $10 billion balance sheet hole that can’t be filled. The claim: It doesn’t owe $10 billion to anyone, but rather a figure of about $9.8 billion represents the maximum potential cash outlay from swaps sold on “synthetic” securities.
The statement from AIG:
Please find enclosed a statement released this afternoon by AIG Corporate Communications in response to an article that appeared today in The Wall Street Journal incorrectly reporting AIG has a previously undisclosed obligation to counterparties of about $10 billion. Specifically:
–The $9.8 billion notional amount does not represent a loss to AIG or a debt it owes to counterparties.
–It represents the notional value of the maximum potential cash settlement portion of the multi-sector portfolio. AIG’s remaining exposure is actually less than $9.8 billion.
–As we have previously announced, AIG is addressing its exposure to its entire multi-sector CDS portfolio through its existing credit arrangement with the Federal Reserve Bank of New York.
–The notional amount attributable to the cash settlement portion of the AIG Financial Products multi-sector credit default swap portfolio has been consistently included in the total AIG Financial Products multi-sector credit default swap exposure in AIG’s SEC filings and is explained on page 117 of AIG’s September 30, 2008 Form 10-Q.