Rating Agencies Cool With New Bailout Of Black Hole AIG

The government is putting the finishing touches on the latest version of the $150+ billion AIG bailout. No word yet on how much more cash taxpayers will have to shovel into the black hole.

Serena Ng, WSJ: Major credit rating agencies have signed off on the latest revamp of American International Group Inc.’s $150 billion government rescue package, people familiar with the matter say, removing the most immediate threat to the plan’s implementation.

AIG’s latest restructuring, the third iteration since the company’s near collapse in September, is expected to be announced with the insurer’s results on Monday…

Without the support of the credit rating agencies, AIG would have faced crippling cuts to its ratings. The downgrades would likely have forced it to post billions in collateral on an array of financial contracts. It would have also triggered the termination of many corporate insurance policies, costing AIG billions more.

Many details of the new plan aren’t clear but like the original, it will result in a complete reconfiguration of AIG. Compared to the original agreement, however, which placed harsh conditions on the insurer, the new plan is more forgiving.

The revised plan relies on a series of complicated financial maneuvers that will reduce AIG’s interest and debt burdens, while also deepening government involvement and taxpayer exposure.

Asset sales remain a feature of the new blueprint. It also foresees AIG repaying some of its debt through the transfer of certain assets to the government and the securitization of others. The government’s stake in AIG, which is now just under 80%, isn’t expected to change substantially.

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