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American International Group (AIG) has gone back to the feds. The insurer pulled another $2.2 billion from its Treasury Department facility to support the property-casualty business units that will comprise the restructured company. AIG used the cash from Treasury to redeem some securities held by its insurance subsidiaries to increase liquidity and address rating agency considerations.
According to David Havens, managing director of credit trading at Nomura Securities (NMR), "AIG still needs to be cognizant of where the rating agencies stand on their solvency." He adds, in Bloomberg News, that the funds may have been sought after the company got "feedback from the rating agencies that the regulatory capital within the operating companies doesn't muster up."
To pump up its capital situation, AIG may also tap its credit line with the Federal Reserve by as much as $2.3 billion to repay commercial paper tied to its derivatives unit that's coming due. The company owes $25 billion on its credit line with the Fed, after having used the sale of AIA and American Life Insurance to pay it down by $25 billion. The $25 billion to the Fed comes in addition to $7.5 billion to one Treasury Department facility and $40 billion to another.
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