NEW YORK (Reuters) - American International Group Inc shares fell 17 percent on Thursday, one day after the insurer said it would receive more liquidity from the Federal Reserve of New York in the middle of the worst credit crisis since the Great Depression.
Under the new plan, the Federal Reserve Bank of New York will take up to $37.8 billion in investment-grade, fixed-income securities from AIG in exchange for cash, allowing the company to replenish liquidity used in settling transactions with counterparties.
The deal came only three weeks after AIG, once the world's largest insurer, received an emergency government loan worth $85 billion as losses in its financial products unit drove it to the brink of collapse.
In the same period, financial markets sank, wiping out banks and forcing government bailouts around the world.
"On their balance sheet they have assets that have sensibility to market moves; and when the market went through the last three weeks of price declines, some of their assets continued to have pricing pressure down, and that was forcing their need to source new capital," said Keith Wirtz, president and chief investment officer of Fifth Third Asset Management.
Last week, AIG announced it was selling most of its assets to repay the government loan, and said there were many buyers interested; but no deal has been closed yet.
"The government has effectively provided them support for $110 billion, I think they have exhausted that avenue and so I think as they move forward their options have diminished," Wirtz said.
AIG shares were down 55 cents or 17 percent to $2.64 in early trading on the New York Stock Exchange.
(Reporting by Juan Lagorio, editing by Gerald E. McCormick)
