Tuesday, September 16, 2008

Government May Take Control of AIG; $90 Billion Loan

The Fed is considering offering a secured bridge loan to AIG, and under the proposed rescue plan, the U.S. government may end up controlling the firm, according to a person familiar with the matter, WSJ is reporting.

UPDATE CNBC reports:

Sources put the size of the loan at $85 billion to $90 billion, adding that it will be secured and include incentives for quick asset-sales by AIG.

As part of the deal, the government will get warrants for most of AIG’s equity—severely diluting existing shareholders.

UPDATE 2 NYT reports:

Fed to Give A.I.G. $85 Billion Loan and Take 80% Stake

In an extraordinary turn, the Federal Reserve agreed Tuesday night to take a nearly 80 percent stake in the troubled giant insurance company, the American International Group, in exchange for an $85 billion loan, according to people with knowledge of the negotiations

-EPJ Newsdesk

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