Private-equity honcho J. Christopher Flowers is considering buying billions of dollars worth of bad debt on the cheap from American International Group as the struggling insurance giant looks to offload its most toxic assets, The Post has learned.
As The Post reported last week, AIG hired JPMorgan Chase to help it structure a deal in which the company would spin off its problem debt in a “good insurer/bad insurer” structure.
Sources say a plan has not yet been cemented but Flowers’ private-equity firm, J.C. Flowers & Co.,is backed by $4 billion in equity from China Investment Corp for the explicit purpose of investing in distressed bank assets. The Beijing-based sovereign wealth fund is said to have a pool of capital in the ballpark of $200 billion.
Other private-equity investors are also considering purchasing some of AIG’s so-called bad assets.
Calls to Flowers and AIG were not returned.
Meanwhile, several reports said AIG might speed up its plan to raise capital or sell assets before CEO Robert Willumstad’s original Sept. 25 deadline after shares tanked 46 percent this week.
What’s more, Standard & Poor’s late yesterday put AIG’s debt rating on watch for a downgrade.
One of the world’s most prominent insurance companies, AIG has been whacked by its exposure to subprime securities that have triggered record losses in the past three quarters and led to the ouster in June of CEO Martin Sullivan.
Flowers is also taking a look at helping Bank of America strike a deal to buy ailing investment bank Lehman Brothers in which the private equity shop would buy some $40 billion in mortgage assets off Lehman’s books.
AIG shares slumped and the cost of insuring its debt rose to a record yesterday on concern that the company may be the next big US financial firm after Lehman Brothers Holdings Inc. to run short of capital. Standard & Poor’s said it may downgrade AIG’s credit ratings because the share declines may crimp the insurer’s access to capital.