Maurice “Hank” Greenberg, the man who built AIG into a mega corporation, has sat on the sidelines watching both his legacy–his company–crumble and his money–$14.5 billion in stock–vanish. Now, the Financial Times reports that Greenberg has come up with a plan to save the shareholders of AIG. You would too if you owned 282 million shares of AIG.
Greenberg wants to negotiate with the government to get better terms on the $85 billion bailout and he’d like to avoid a fire sale of all the company’s assets. We’re not sure that AIG is in a position of negotiating power as it’s already borrowed $20 billion (from itself), another $85 billion from the government and just last week asked for an additional $37.8 billion. Not to mention the public humiliation of all those pricey corporate retreats.
FT: At the minimum, he said, AIG should have the same borrowing terms as other companies, pointing to other financial institutions that have been able to borrow on less onerous terms.
Mr Greenberg claims that under his plan, AIG would be saved from being liquidated, get a positive response from rating agencies – which could lead to the possible reduction in collateral calls, one of the issues burdening AIG – and make the insurer eligible to sell some of its toxic securities to the new $700bn fund.
He suggests the US government should acquire non-voting preferred stock in AIG – instead of super-voting preferred stock – that pays a 5 or 6 per cent annual dividend. AIG would also have the right to redeem the preferred shares over a period of 10 years at a 10 per cent premium.
“Such a plan would have an immediate impact on the market and would save AIG from being liquidated,” he said. “The US would retain a great company, jobs would not be lost, share value would increase, and sales of assets could be undertaken in a more orderly fashion than what is currently contemplated.”
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