Monday, September 15, 2008

AIG Deal before U.S. Market Open?

by Bill McBride on 9/15/2008 09:56:00 PM

Some interesting details from the NY Times: Fed Takes Steps to Aid A.I.G

The complex discussions, continuing into the night as a deal was hoped for before United States markets open on Tuesday, involved New York state regulators, federal regulators, private equity firms and Wall Street banks that rely on A.I.G.’s ability to honor its derivatives contracts ...
emphasis added
...
The urgency of the talks grew by late Monday as A.M. Best Company, a credit rating organization specialized in insurance and health-care companies, downgraded the credit of A.I.G. and several of its major subsidiaries. Fitch Ratings also downgraded A.I.G.’s credit Monday evening.

Standard & Poor’s downgraded its long-term and short-term counterparty ratings on A.I.G. Monday evening.

But none of those downgrades appeared to be trigger events requiring A.I.G. to post billions of dollars of collateral to its swap counterparties.
...
People briefed on the matter said that if JPMorgan and Goldman Sachs were able to raise a $75 billion credit line by Tuesday, it could avert the all-important debt downgrades by Standard & Poor’s and Moody’s.
AIG seems to be hanging by a thread.