In a move telegraphed since last week, it looks like AIG (AIG) will get a bailout from its bailout! The Journal reports that the old $123 billion plan may be scrapped in favour of a $150 bailout plan with less stringent terms. Awesome.
Under the terms being discussed late Sunday, the government would give AIG more money, including $40 billion from the U.S. Treasury’s $700 billion Troubled Asset Relief Program. It would also demand less interest than on the bulk of the original loan, while freeing AIG from exposure to some of the risky financial instruments that nearly caused it to file for bankruptcy protection.
Remember when the original rescure measure was passed? It was justified on the grounds that the government was charging such a high interest rate that it would make money hand over first. Well, guess what: weak companies can’t afford stringent, onerous loans
The changes follow widespread criticism from some large shareholders of the original rescue plan, which would have required AIG to quickly sell assets in a declining market while also paying steep interest rates on its loans from the government.
Under the new plan — which hasn’t been nailed down yet, according to the report — the most troubled CDS assets would be hived off into their own vehicles, capitalised by the government.
Watch for a plan tomorrow morning, when AIG reports, ahem, earnings. We’ll be all over it, as well as the 8:30 conference call.
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