UPDATE: NY Fed Gives Morgan Stanley Wider Role In AIG Advice
July 20 2009 - 2:27PM
Dow Jones News
Morgan Stanley (MS) has been named as a primary financial
adviser for any initial public offerings or divestitures for units
of American International Group Inc. (AIG), according to documents
released by the New York Federal Reserve.
The New York Fed, which has played a leading role in the
government bailout of AIG, said it paid Morgan Stanley a $4 million
advisory fee along with $2.5 million each quarter. The investment
bank can also bill expenses related to work done on behalf of the
failed insurer.
In addition, the documents also showed that the Fed agreed to
pay Ernst & Young LLP as much as $60 million for its advice
relating to AIG. The accounting firm in September had a $40 million
limit before it was amended in May, according to the documents.
Ernst & Young is charging $775 per hour for work done by
partners or executive directors. The New York Fed will also
reimburse Ernst & Young for expenses related to AIG work.
The central bank and Treasury Department have pumped more than
$80 billion into AIG as part of a rescue package to avert
bankruptcy for the insurer. AIG recently reduced its debt to the
government by $26 billion in a deal that gave the Fed preferred
shares in some of the insurer's businesses that might be spun
off.
The New York Fed also said that Morgan Stanley will act as a
financial adviser for any sale of AIG's stock or credit default
swaps by the central bank.
Though the fees paid to Morgan Stanley might be small, the
investment bank is positioned to reap significant fees once it
helps to spin off AIG units.
AIG said last week it will speed up efforts to take its American
Life Insurance Co. unit public and pursue a stock market listing in
New York.
This comes even as AIG has recently engaged in talks with life
insurer MetLife Inc. (MET) for its flagship international life
insurance unit, which is known as Alico. The unit operates in 50
countries, from Japan to Europe.
In addition, AIG is also pursuing an initial public offering for
AIG's American International Assurance. That IPO is widely expected
to be in Hong Kong.
A sale or IPO of Alico and AIA would allow the Fed to sell its
stakes in both companies and make some money.
-By Joe Bel Bruno, Dow Jones Newswires; 212-416-2469;
joe.belbruno@dowjones.com
(Lavonne Kuykendall contributed to this report.)