American Int’l Group (AIG), the insurer that has received up to $180 billion of federal aid, will likely be able to repay the government’s senior secured loan and much or all of its preferred equity stake if the co.’s operations and global financial markets continue to stabilize, Moody’s Investors Service said in a statement yesterday.
The U.S. is “committed to working with the firm to maintain its ability to meet obligations as they come due throughout the restructuring process,” Moody’s said. [Bloomberg]
While the credit agency is making this surprising revelation on a company that continues to face significant challenges, as the restructuring components of the government’s assistance continues to support the firm’s efforts to separate its non-core businesses and stabilize, Moody’s warn that a decline in the realizable values of AIG’s assets could reduce the government’s incentive to support other creditors.
AIG has made tangible progress on its restructuring plan which is designed to enhance the company’s capital and liquidity and facilitate the completion of its global divestiture program. “The slower approach to restructuring could help AIG to generate more favorable values from its business portfolio than would be the case under rushed asset sales,” Moody’s said.
AIG posted third-quarter net income of $455 million last week, its second straight profitable period, helped by a recovery in the value of its investments, though the co.’s underlying business continue to remain weak.
The quarterly results “show continued stabilization of the core insurance operations despite challenging market conditions,” Moody’s said.
The agency affirmed AIG’s long-term rating of A3, the seventh-highest investment grade, with a negative outlook.
Credit spreads on AIG’s 8.25%t notes due in 2018 tightened by 15 bpt on Tuesday to 751 bpt over U.S. Treasuries, according to MarketAxess.
AIG owed more than $44 billion on the credit line as of last week and has tapped more than $40 billion from Treasury facilities
Shares of AIG advanced $1.30 to $37.48 at 11:16 EST in NYSE trading.
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