Ratings agency Moody’s has downgraded AIG by one notch, after the cash-strapped US insurance giant promised to undergo by Friday recapitalization measures to repay a government bailout.
The downgrade of AIG’s senior unsecured debt rating from A3 to Baa1 reflects “Moody’s view that while the core insurance operations have stabilized over the past year, they have not yet improved sufficiently to justify the previous ratings in the absence of continued government support,” the agency said late Wednesday.
“Moody’s also believes that the incremental risk associated with noncore businesses, while reduced, remains a negative credit consideration that will no longer be mitigated by government support.”
It also revised AIG’s rating outlook to “stable” from negative.
Hours earlier, AIG had indicated it was working to finalize a number of recapitalization milestones by Friday, though those plans remained uncertain.
After completing an exchange of 1.66 billion shares of AIG common stock for the 49.1 billion dollars of Troubled Asset Relief Program (TARP) preferred shares, AIG said the Treasury Department will own about 92 percent of the company’s outstanding shares, as well as a new series of preferred shares.
The progressive sale of these shares will allow the government to eventually leave its investment in AIG behind, but no date has been set yet.
For now, AIG simply indicated it was expecting the Federal Reserve Bank of New York to be “fully repaid” Friday, for nearly 50 billion dollars.
“With today’s announcement, we anticipate that we will be able to deliver on our promise to the American people to repay the extraordinary assistance they provided to AIG during the financial crisis of 2008,” AIG president and CEO Robert Benmosche said in a statement.
We remain grateful for their support of AIG, and we remain convinced that the American people will realize a profit on their investment in our company.”
New York, Jan 13, 2011 (AFP)
