Value of Fed-owned AIG troubled assets has risen on paper
AIG’s controversial bank credit insurance contracts (CDOs) taken over by the Federal Reserve have risen in value from $29.6bn to $45bn, the FT reports.
A New York Fed-financed vehicle Maiden Lane III bought the CDOs so that the insurance contracts written on them could be terminated.
“With the rally in the credit markets and tightening spreads, the Fed has made a killing – on paper,” the FT quoted one person familiar with the portfolio.
Cutting the loan
Maiden Lane III was funded with a $24.3bn loan from the New York Fed and $5bn in equity from AIG. The CDOs have produced cash, cutting the balance on the Fed loan to $17bn, the FT said.
Any sale would pay off the Fed loan first, followed by the AIG investment. The Fed would receive 67% of any additional profits, and AIG 33%.
No comments yet