Capital Constraints Keep Pulling AIG Down

Sep.12, 2008 in Market Outlook

By Lavonne Kuykendall
Of DOW JONES NEWSWIRES
NEW YORK (Dow Jones)–Shares of American International Group Inc. (AIG) continued to plummet Friday, following Lehman Brothers Holdings Inc.’s (LEH) fall, on growing concerns about the company’s ability to raise capital in a tough market.

In recent trading, AIG was down 21% to $13.93, its lowest share price in more
than 20 years, and pushed the company’s market value to around $39 billion, a
fraction of its value just a year ago.

“AIG may need to raise capital (either by selling assets or finding new
investors) in order to stave off ratings agency downgrades,” said Gimme Credit
analyst Kathleen Shanley in an email message Friday. “Lehman’s travails this week
show how difficult it is for a company perceived to be under stress to accomplish
either of these goals in the market right now.”

AIG could decide to sell or spin off parts of its business to raise money, and is
conducting a review of its businesses. It plans an investor update Sept. 25.

The need for capital comes as losses from AIG’s huge portfolio of securities
backed by subprime mortgages appear likely to generate more losses in the third
quarter, while its mortgage insurance and lending businesses also are likely to
suffer.

AIG reported a second-quarter net loss of $5.36 billion, after a first-quarter
loss of $7.81 billion.

Did you like this? If so, please bookmark it,