From the WSJ:
Maurice “Hank” Greenberg, saying the terms of federal government’s $85 billion bailout of American International Group Inc. would result in the liquidation of the insurance giant, proposed changes to keep the company viable.
Last month, AIG’s board entered an agreement with the Federal Reserve Bank of New York to obtain the bailout via a two-year credit facility that requires AIG to pay a 2% one-time commitment fee, 8.5% interest on undrawn capital and a floating rate that is currently 14% on drawn capital. The U.S. Treasury received a 79.9% stake in AIG from the deal.
The interest charges currently add up to $1 billion monthly.
Yikes, $1 billion a month? There is no way they’ll make it at that rate. If AIG got the same terms as the “good” banks, they might have time to wind things down in an orderly manner. Of course, they don’t qualify as a “good” anything, but based on what I’ve heard, the last thing we need right now is for AIG to actually file bankruptcy. Liquidating their CDS book would make Lehman look like a walk in the park.