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AIG shares plummet in early trading after agencies cut credit ratings

American International Group Inc. shares plummeted in early trading yesterday after the insurer's credit ratings were cut, jeopardising efforts to raise cash necessary for its survival.

  • Reuters
  • Published: 23:52 September 16, 2008
  • Gulf News

New York: American International Group Inc. shares plummeted in early trading yesterday after the insurer's credit ratings were cut, jeopardising efforts to raise cash necessary for its survival.

In pre-market trading, AIG shares were down $1.83, or 38.4 per cent, at $2.93. They closed at $22.76 as recently as September 8.

Late Monday, Standard & Poor's cut New York-based AIG's long-term credit rating three notches to "A-minus" from "AA-minus", citing "reduced flexibility in meeting additional collateral needs and concerns over increasing residential mortgage-related losses."

Moody's Investors Service on Monday cut AIG's rating two notches to "A2" from "Aa3," while Fitch cut its rating two notches to "A" from "AA-minus." Those agencies' new ratings are the equivalent of one notch higher than S&P's new rating.

The downgrades will make it much more difficult for AIG Chief Executive Robert Willumstad to raise cash. The company suffered $18 billion of losses in the last three quarters tied to guarantees it wrote on mortgage-linked derivatives.

AIG's struggles are mounting a day after Lehman Brothers Holdings Inc filed for Chapter II bankruptcy protection because of its losses tied to mortgages and real estate.

JPMorgan Chase & Co. and Morgan Stanley are examining putting together a $70 billion to $75 billion credit facility for AIG, a person familiar with the matter said on Monday.

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