The appointment by troubled insurer AIG (AIG) of a new CEO, Bob Benmosche, formerly of MetLife (MET), last month, has been the occasion of some optimism for the company, the stock up 35% in the last month.
But AIG still has a lot of restructuring to do, and it will yield little value to investors, contends Credit Suisse analyst Thomas Gallagher in a note today to clients.
Gallagher cut his rating on the stock from “Neutral” to “Underperform,” with a price target of $15, down from $30, or one times book value by his calculations.
Benmosche’s in a bit of a tough spot, writes Gallagher: the company’s various businesses are eroding, which means they need to be sold off or IPO’d before they deteriorate further and use the proceeds to pay off some $53 billion of financial debt.
At the same time, if these businesses are rapidly dispossessed, there would be little common shareholder equity left, what with $59 billion of financial debt, $18 billion of “private market hybrids,” and $43 billion in preferred stock own by the US Government after several bailouts of AIG — a total of $119 billion in obligations versus a $70 billion to $100 billion value of the current businesses.
AIG shares today are off $3.82, or 10%, at $36.23.
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