AIG might have averted the sharp cuts to its credit ratings that forced it to seek a government bail-out last week if Lehman Brothers had been saved from bankruptcy, according to analysts at credit rating agency S&P. “The Lehman bankruptcy was not the only cause but it was a contributor,” said Rodney Clark, S&P analyst, adding that AIG shares and credit might not have experienced as severe a market reaction if Lehman had not filed for bankruptcy. The downgrades of AIG’s debt last Monday forced the insurer to come up with billions of dollars of collateral payments immediately to pay banks with which it has many derivatives trades outstanding. Its inability to finance the payments, as well as calls for extra collateral related to the declines in the market value of its derivative positions, pushed AIG close to bankruptcy early last week. This, in turn, forced the US government by Tuesday evening to make an $85bn bridging loan in return for a 79.9% equity stake in the troubled company. S&P warned Sept 12 that it might cut AIG’s ratings.

This entry was posted by Gwen Robinson on Monday, September 22nd, 2008 at 5:32 and is filed under Capital markets. Tagged with aig, s&p. Edit this entry.