AIG’s mysterious Schedule A finally revealed

AIG/The heavily-redacted regulatory filing that spells out the details of the New York Federal Reserve’s controversial bailout of American International Group is a secret no more.

Reuters has obtained a copy of the five-page document the giant insurer and the New York Fed had asked the Securities and Exchange Commission to keep confidential. The effort by the New York Fed to keep the document under wraps has sparked a furor on Capitol Hill and was the subject of a hearing on Wednesday by House Committee on Oversight and Government Reform.

The unredacted version of the “Schedule A – List of Derivative Transactions” fills out some of the missing pieces in the AIG bailout, in which an entity set-up by the New York Fed effectively funneled tens of millions of dollars to 16 big U.S. and Europeans banks that had bought credit default swaps from the insurer.

The unredacted version of the Schedule A enables some to identify all of the 178 mortgage-related securities, or collateralized debt obligations, that AIG wrote insurance-like protection on.

It’s been known for months that Goldman Sachs and Societe Generale were the two banks who recieved the most money in the dea because they had insured the most CDOs with AIG. But the new information enables traders, investors and the general public to see just which deals the banks had purchased insurance on.

DealZone Daily

Kraft’s acquisition of Cadbury is expected to trigger the next blockbuster sale in the global corporate bond market as the company refinances an $11.5 billion bridge loan used to temporarily fund the deal.  The world’s second largest food group Kraft is expected to have no trouble drawing demand for a bond sale, thanks to its investment grade ratings. Read the Reuters story here.

Private equity giant KKR is to launch a partnership to invest in consumer services, education and media businesses, a source familiar with the situation said on Monday. It will launch the business with Jonathan Grayer, former chairman and CEO of Kaplan, a unit of Washington Post Co.  Grayer was CEO of Kaplan for 14 years in 2008.

And in other media:

American International Group has decided not to sell its aircraft leasing unit International Lease Finance Corp, the Financial Times said, citing people close to the situation.  AIG has realised that it will not reap a big profit from the divestment of the business, ptompting it to scrap the sale plans.

GMAC plays its too-big-to-fail card… again

The Treasury, as major shareholder of such credit boom casualties as Citigroup and General Motors, showed with its $3.8 billion infusion into GMAC that it can still be counted on to safeguard the financial system from systemic collapse. The auto-loan company, which had dutifully spread its wings into mortgages in the housing boom, wound up becoming a bank to qualify for TARP bailout funds a year ago – the day after Christmas 2008, to be precise. How could Treasury say no?

Now taxpayers are plonking another $3.8 billion into GMAC to help cover mortgage losses. That gives us another majority shareholding in a company that could not have survived to pay its bills, workers and its executives without aid. No, it’s not much in terms of the government’s balance sheet. But it should rankle in Congress when lawmakers come back from holiday.

Not far behind the brouhaha over universal health care lays the still smoldering debate over “too big to fail”. Is it naïve to note that the timing of GMAC’s new lifeline came when legislators were safely tucked away at home? Arguing that AIG was too big to fail, with its myriad confusing and distracting derivative contracts, and that GM was too big to fail, with its strategic position just behind the aorta of the American manufacturing heartland, or even that Citigroup, with its corner office (sans fireplace) in the U.S. superbanking community can somehow be extended to GMAC might seem farfetched to fiscal hawks.

AIG’s revolving CEO door

The Wall Street Journal reports AIG Chief Executive Robert Benmosche threatened to walk last week. Chafing after the recent compensation review by pay czar Ken Feinberg, Benmosche reportedly told AIG directors he was “done,” but the board talked him down and he agreed to think it over.

Benmosche took over as the insurer’s chief executive in August, becoming the fourth person to hold the post in about a year. On his watch, the recipient of up to $180 billion of federal aid, including more than $80 billion in loans, posted its second straight quarterly profit last week.

A recovery in the value of AIG’s investments has helped improve the bottom line at the 80 percent state-owned insurer, and it may be that the next CEO, if Benmosche catches the revolving door on the fly, will be able to justify better pay on improving performance. AIG said at the end of October it was no longer looking to sell two Japanese units, AIG Edison Life Insurance and AIG Star Life insurance, because it now believes they will help improve its corporate value.

DealZone Daily

American International Group has agreed to sell it’s Taiwan life insurance unit for $2.15 billion, a key step in its effort to raise cash after a U.S. government bailout last year saved the company from collapse, Reuters reports.

CIT Group Inc is seeing little interest from bondholders in a debt exchange offer aimed at repairing its fragile balance sheet, making bankruptcy increasingly likely, sources familiar with the matter told Reuters.

The following other corporate finance-related stories were reported by media on Tuesday:

Citi selling its jewels

Occidental Petroleum is buying Citi’s commodities trading unit Phibro for roughly its net asset value. How much that is, exactly, is hard to tell. Occidental said its net investment in Phibro is expected to be about $250 million.

The bigger figure, of course, is the $100 million associated with star trader Andrew Hall. His pay package has been the subject of much hand-wringing at Citi and in Washington.

Phibro’s management team, headed by Hall, and its employees will remain with the unit after the sale, expected to close by year-end. Citigroup shares were fractionally lower in morning trading on the New York Stock Exchange, while Occidental shares were up about 1 percent.

The “pay czar’s” name game

Is pay Czar KennKenneth Feinbergeth Feinberg going to name and shame?

At a speech yesterday in Washington, Feinberg said he planned to disclose the pay for the top 25 employees at Wall Street firms within the next 30 days, according to a research note by Jaret Seiberg, of Concept Capital. Seiberg saw Feinberg’s talk.

But it is not clear if names would be redacted from that disclosure, with perhaps only titles and salaries revealed.

Feinberg is charged with examining pay packages at companies that received government bailout money, including Citigroup <C.N> and American International Group Inc. <AIG.N>

Lehman and its aftermath, by the numbers


With apologies to Harper’s Index, some collected statistics on the collapse of Lehman and the roller-coaster year that followed.

Add your own significant digits in the comments section.


Number of siblings who made up the original Lehman Brothers, founded as a dry-goods store in 1844: 3

Age of Bavarian immigrant Henry Lehman when he founded the business: 23

Percentage difference between the DNA of former Lehman CEO Dick “The Gorilla” Fuld and an actual gorilla:

No disrespect intended

Robert Benmosche, the new CEO of AIG, tells us he regrets tough comments he made about New York’s attorney general, explaining that he was trying to bolster a demoralized AIG work force. “You can characterize me as a goon or you can characterize me as somebody who is attempting to deal with a complex issue of a very demoralized employee force and said those things to them in confidence to reassure them that they no longer have to be afraid that they are going to be attacked again,” Benmosche told Adam Tanner in an interview.

During a closed-door staff meeting in Houston, Texas, last month, Benmosche said New York Attorney General Andrew Cuomo “doesn’t deserve to be in government” and had acted like a “criminal.” Cuomo’s office declined to comment on the matter.

Given the poisoned chalice the stewardship of AIG has been for his predecessors, Benmosche may be taking the only tack available. The former CEO of MetLife and native New Yorker, who prides himself on a reputation for toughness, did try to couch his comments somewhat, saying from his Croatian villa that “one should not assume that my aggressiveness is disrespect.”

Dribs and drabs from AIG’s fire sale

Sometimes it’s easy to sniff at $70 million, particularly when you have government loans of $80 billion to repay (while the total size of the AIG bailout was closer to $180 billion, much of that consists of toxic mortgage assets that are now owned by U.S. taxpayer). So news that AIG has agreed to sell its Hong Kong consumer finance and India-based IT services units for that amount may seem to be a paltry offer for discussion, even in the blogosphere.

It’s not as if the well is dry on the M&A front. Microsoft and Nokia are set to announce a tie-up of some sort – assumed to have to do with office apps on Nokia phones – and UBS is inking a deal to get it out of the tax-haven doghouse with U.S. authorities.

But spare a thought for poor AIG nonetheless. AIG Financial Products said this week it had completed the sale of its energy and infrastructure investment assets for net proceeds of about $1.9 billion – better than a 1 percent chunk of its total bill to U.S. taxpayers, but the division blamed for so much still has mountains of assets to unload. And it has stepped up plans to list its Asian insurance unit, American International Assurance, in Hong Kong after failing to find a buyer for a large stake in it earlier this year.