AIG Bailout and AIG Bailout Exit Plan Essay Example | Topics and Well Written Essays - 500 words

AIG Bailout and AIG Bailout Exit Plan - Essay ExamplePost the financial stress, AIGs credit rating was downgraded and it required $14.5 billion in collateral in order to improve the credit rating. When private banks denied support, political science became the sole option. For the US government, it was a hard bargain. After many rounds of meetings the government decided to lend up to $85 billion. But this threshold was later crossed and the total bailout value reached about $182 billion in different forms. This resulted in the government owning 80% of the then struggling insurer. This equity holding was in the form of equity participation notes. This loan was granted by the government for a period of 2 years. The government had negotiated on all ways to protect the taxpayers money. This two year loan carried an interest rate of 8.5% points plus the LIBOR rate. Apart from that it also carried collateral right on major assets of AIG. Thus, if market and the company prosper, the govern ment will receive huge returns through its equity stake. If it happens otherwise, it can recoup the investment through the claim on assets and the interest on loans. The government bailout helped AIG to sell off its unprofitable business and to get restructured into a healthy operational position. Exit Plan AIGs bailout choke off plan came out in the mid of 2010.