AIG shares plummet in early trading after agencies cut credit ratings

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.