September 4, 2008

Lehman & AIG Plans for bad Assets Spinoff

Lehman Has Plan for Real-Estate Loans -

A.I.G. Said to Consider Spinoff Strategy- NY Post

AIG and Lehman Brothers, two of the most troubled financial institutions, are considering a spinoff of troubled assets to shareholders. This may prove interesting. This will be similar to buying distressed debt like many funds are doing right now. Well, it depends on the price of the spinoff company off course. I would be willing to buy on two conditions:

  1. a new manager of the company that have experience in distressed assets, and
  2. price of no more than 30 cents on the dollar.
I think that the spinoffs will never materialize and the assets will be sold to private equity eventually, similar to the deal Merill struck with Apollo management. Private equity have been fund raising new capital to buy distressed assets and what AIG and Lehamn are doing right now is more or less marketing the assets and creating some demand for it. That or they did not like the price that private equity have offered them so far and I am pretty sure Lehman and AIG has talked to them.

Here is a table of recent distressed debt to private equity:

I do not think either company will talk in their registration statements, if there is any, about "unlocking of shareholders value" because they are doing pretty good so far in creating value for their shareholders.

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