AIG’s Rating Downgraded

The pressure on American International Group (AIG) continues to mount as the troubled insurer was hit by a series of credit rating downgrades. Moody's Investors Service and Standard & Poor's Ratings Services late Monday night each said they had lowered their ratings.     
     
A few hours earlier, Fitch Rating had also downgraded AIG, saying the company's ability to raise cash is "extremely limited" because of its plummeting stock price, widening yields on its debt, and difficult capital market conditions.     
     
The downgrades will make it more expensive for AIG to issue debt and harder for it to regain the confidence of investors.     
     
Fitch said AIG could be required to post $10.5 billion of additional collateral if it was downgraded one notch by one of the other major rating agencies and $13.3 billion of collateral if downgraded by both, Fitch said in a statement, citing AIG's July 31 estimates.     
     
The grim assessments came after a day in which state and federal officials raced to help the insurer gain access to much needed cash.     
     
The company has lost more than $18 billion in the past nine months.     
     
AIG did not immediately reply to a request for comment on the late-night downgrades.     
     
New York State gave AIG, the nation's largest insurer, the power to transfer $20 billion in assets from its subsidiaries to use as collateral for daily operations, said Gov. David Paterson. In exchange, the parent company will give the subsidiaries less-liquid assets.     
     
"It is simply giving AIG (AIG, Fortune 500) in effect the ability to provide a bridge loan to itself," said Paterson, stressing the company is financially sound and that no taxpayer dollars are involved.     
     
Meanwhile, the Federal Reserve asked Goldman Sachs (GS, Fortune 500) and JPMorgan Chase (JPM, Fortune 500) to make $70 billion to $75 billion in loans available to AIG, the Wall Street Journal reported.

Published on September 16, 2008