Maurice Greenberg, the former chairman and chief executive of American International Group, has written his old company urging management to renegotiate their $85 billion government loan, saying its current terms will destroy the firm.
In a letter filed with the Securities and Exchange Commission, written to AIG’s current CEO, Edward Liddy, Mr. Greenberg attached a “plan to save AIG.”
As Mr. Greenberg calculates it , AIG ’s $85 billion federal loan “carries an actual interest rate in excess of 14 percent , and on top of that, the government receives 79.9 percent of the ownership of AIG. ”
He added that “ b ottom-line , this means that AIG cannot pay of f this loan from the proceeds of selling assets in this market, nor can it pay the annual interest rate from earnings . ”
Mr. Greenberg warn ed that as a result , “thousands of jobs will be lost, pensioners will lose their savings, and millions of shareholders will be disenfranchised. It is a los e /lose plan.”
However, he added , “if the loan were changed to non-voting preferred stock , with an approximately 5- to- 6 percent dividend and a 10-year right of redemption for AIG at a 10 percent premium , this could be turned into a win/win situation.”
His plan stated that AIG at a minimum should be “afforded the same borrowing terms as other companies.”
He noted that since the loan was arranged , the Federal Reserve has stepped up direct lending to scores of financial institutions , and for the first time last week to non - financial institutions that are able to borrow on “terms far less onerous than those imposed on AIG…”
Mr. Greenberg’s AIG stock holdings, now estimated at $1 billion, were said to be about $20 billion when he left the com pany amidst an accounting scandal in 2005, with allegations that finite reinsurance deals were misused to artificially bolster the company’s balance sheet.
