Monday, November 10, 2008

Naked Capitalism on AIG

 Yves (Naked Capitalism) does an admirable job picking apart the latest AIG story.  

My original calculations on the AIG bailout are being blown out of the water.  I just wonder however what this does to AIG bonds.  The minus side is obvious - AIG is much worse than it appeared in advance.

The plus side for the bonds is that the government is turning much of its injection into preference shares - and that means the Government injection is subordinate to the bonds.  That logically increases the value of AIG bonds.  

Net-net it is probably a wash - but I have not thought through the details enough.


Follow up:  The bonds are well dealt with in this post.

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