AIG Moving Slowly on Asset Sales To Pay Debt

If the results so far are any indication, it could take insurer American International Group a long time to repay the government for its colossal federal bailout.

AIG has been trying to sell pieces of itself to raise cash, and yesterday it announced an agreement to sell a Canadian life insurance subsidiary for about $308 million. That was the fifth sale the company has arranged since its September bailout, and together they would barely put a dent in the company's debt to taxpayers.

"It's been a slow process thus far," analyst Rob Haines, of the research firm CreditSights, said.

"The deal they did today is really just a drop in the bucket," and before AIG can inspire confidence in its ability to repay the government, "we're going to have to see much more than these little drips and drabs," Haines said.

The Federal Reserve has given AIG a $60 billion credit line, and as of last week AIG was using $39.2 billion of that. The company has five years to pay the debt, and in the meantime it will make partial payments with the proceeds from asset sales. The credit line is part of a larger federal rescue package for the insurer worth up to $152.5 billion.

Before the government renegotiated the bailout in November, AIG had two years to pay down a credit line of as much as $85 billion.

The five asset sales announced so far are too few and too small to support any conclusions about AIG's prospects, spokesman David Monfried said.

"The big assets that we'll be bringing to market over the coming months will be commanding in the tens of billions in some cases," Monfried said.

"We do have a time horizon here that does not require us to move these assets at fire-sale prices, and will not do so," Monfried said.

Market conditions could hardly be less favorable. The most logical buyers for AIG's subsidiaries include other financial services companies, and their stocks have generally taken a beating, which reduces their buying power. In addition, there remains a shortage of financing for mergers and acquisitions.

AIG is in the early stages of gauging potential buyers' interest in larger assets such as life insurance companies based in Hong Kong and Tokyo, Monfried said.

AIG recently received and is now evaluating bids for one of its more valuable assets, an aircraft leasing business known as International Lease Finance Corp., according to a source who spoke on condition of anonymity because the negotiations are confidential.