Capital Markets

AIG, Eyes Widening, Seeks $20B in Capital

Insurance giant, pummeled by the mortgage crisis, expands plan from a mere $12.5B and aims to use some proceeds for foreign growth.
Stephen TaubMay 20, 2008

Loss-ridden American International Group Inc. said it is in the middle of a campaign to raise as much as $20 billion in fresh capital, according to the Associated Press. Earlier this month, the company said it was seeking “just” $12.5 billion.

But AIG chief executive Martin Sullivan told at an investor conference in London, hosted by Lehman Brothers, that the insurance giant has already closed on raising about $13.5 billion, and is aiming for much more.

AIG is the latest of a slew of financial services giants to have raised several billion dollars in the capital markets through a combination of equity, debt, and preferred securities, leading some analysts to proclaim that the bottom of the global credit crisis has been reached.

Still, billionaire gurus such as Warren Buffett and George Soros, along with some well-regarded hedge fund managers, believe the worst may yet be to come.

In any case, AIG hopes to use the new capital to boost foreign expansion and strengthen a capital base that has been harmed by the deterioration in the mortgage markets, the AP noted. AIG lost $7.81 billion in the March quarter.

“AIG’s total capital raise will be about $20 billion, which will roughly offset lost shareholder equity over past six months,” Lehman Brothers analyst Jay Gelb wrote in a note to clients.