AIG Hides Asset Sale Terms in AGF-Fortress Deal (AIG, FIG)

American International Group, Inc. (NYSE: AIG) is still one of the most hated companies, but not so by private equity buyers looking to see what meat can picked off of a carcass.  AIG and Fortress Investment Group LLC (NYSE: FIG) have announced a definitive agreement where Fortress funds and affiliates will acquire a large majority stake in American General Finance Inc.  from AIG.  Unfortunately, the taxpayer has no idea what AIG got out of this deal.

AGF is a provider of consumer credit that has been in operation since 1920.  It offers loans, retail financing and other credit related products; and its claims more than a million families as customers.  Its products and services also include bill consolidation loans, home equity loans, personal loans, home improvement loans, and loans to help consumers manage unexpected expenses.

Under the deal, 80% will be bought by Fortress and AIG will retain a 20% interest in the AGF business.  Where this gets interesting, particularly if you know your tax money bailed out AIG, is that the financial terms of the transaction were not disclosed. That is typical in many deals, but AIG should have to have an open book right now.

The companies noted that the deal is expected to close by the end of the first quarter of 2011.

AIG’s CEO Robert Benmosche called this “another important step in our ongoing restructuring process as we seek to monetize non-core assets and pay back U.S. taxpayers.”  The problem is that there is no way to know yet what the “monetization” is because financial terms were not disclosed.

AIG noted that AGF has assets of about $20 billion and liabilities of about $18 billion including $17 billion of debt.  These figures will be de-consolidated from AIG’s financial statements.

Where’s the meat?  AIG gets to keep a 20% stake that will have an unknown and undisclosed value in the future.  Without seeing the deal terms, it is impossible to know just what AIG is getting.  Sure, it gets to move off some assets and liabilities from its balance sheet.  What does it get?  For all practical purposes, AIG may have sold this for as low as $1.00 to move assets and liabilities off its books.

AIG spells out what it still owes to the U.S. taxpayers on its site.  How this sale helps dwindle that figure of $101.2 billion was unfortunately hidden in today’s news release.

“Dear Mr. Benmoshce: Please offer full disclosure in the future.  You might be a savior for AIG and its woes were from before you came on, but you still work for one of the most hated companies in America.”

JON C. OGG