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Friday, May 15, 2009
AIG: SENIOR BONDS FROM SUBSIDIARIES
Most Recent Post (8/13/09) on Bonds from AIG subsidiaries: American General and International Lease Finance /Foreclosures
Updated Posts on American General Finance bonds:
UPDATED POST ON SALE OF AMERICAN GENERAL FINANCE BONDS AT PRICE HIGHER THAN QUOTED THIRD PARTY PRICE: ITEM # 5 Afternoon Comments 6 11 2009/GS on Electric Utilities/Bought 30 TIP-Sold Am Gen Bonds/Sold 50 FJA & SE & Bought 100 MJT
****************************************Original Post:
I have seen some interest in my brief discussions about the senior bonds issued by American General Finance and International Leasing, both AIG subsidiaries.
I have sold about 70% of International Lease bonds at a small loss, just out of caution when the caution police was called out, but I intend to keep 3 bonds maturing in about 3 months and a smaller number next year. I also own an American General Finance bond maturing later this year, which I intend to keep until maturity and just hope that the Lord takes pity on this poor soul.
The pricing of the International Lease bonds has improved since I last discussed them. The third party price on the one that I own maturing in August 2009 has risen from around 80 to 90 over the past couple of weeks. The American General Finance bond has also improved some. Sometimes I check the FINRA data to see pricing of American General Finance bonds a few years down the road. Search Results I would have to say that the market does not have much confidence in this sub surviving to 2013 based on the pricing of this debt, though pricing has improved since the 15 cent to the dollar quotes mentioned in a prior post. Hedge Funds Receive Bailout Cash/General Mills/Lottery Tickets & NADX
That later post was dated March 19th.
Anyone can find quotes at FINRA for these sub bonds by going to the main FINRA page.FINRA - Investor Information - Market Data - Company Information Enter AIG in the Box. On the next page, scroll from stock to bond in the search box at the top right. Then click "go". You then have to just navigate to you find the one that you are looking for.
Since I own these bonds, I do look at their SEC filings and both of these subs file reports:
American General: SECURITIES AND EXCHANGE COMMISSION
International Lease Finance: e10vq
The quarterly report from American General is not pretty. So, being conservative, I would not touch it. International Lease has enough issues disclosed in its report to keep me on the sidelines. If Bill Gross or anyone else wants to venture in this area, then they need to do so with their eyes wide open and only after becoming fully informed. I just want my money back from them.
ADDED THESE LINKS TO PRIOR BLOG DISCUSSIONS 11 A.M.
Added: 5/16/2009: Some of these bonds are lightly traded or not traded at all. I did manage to sell 8 International Lease Bonds a couple of months ago, and still hold about 5. If you own them at a brokerage account, the broker is using a third party to price them, and it is that price which is reflected in your account. That third party may just be using trades of other bonds from the same issuer to price your bond. So, if there are no recent trades at all for the International Lease or American General Bonds at the FINRA site that you own, the pricing shown may be stale and you would have to locate another one with trades to determine a more recent price.
ADDED 5/20/2009: As part of my Dynamic Asset Allocation approach, I have been selling short term bonds since February, deploying the proceeds into stocks in early March, and I am continuing now to raise additional funds from selling short term bonds for later re-deployment into common stocks. I have targeted for virtual elimination the International Lease Bonds for that purpose, and also to avoid thinking about it anymore. I am now down to just 1 bond maturing in early 2010. (see item #8 Potpourri This Evening May 18th/Bought More AT & T;
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I own Amer Gen Finance bonds. I bought them after the government pumped $87+ billion into AIG. I figured that the USG wouldn't allow an entity that it had essentially bought to default on its obligations, so . . . . . they are almost like government bonds!!!!
ReplyDeleteI sold 9 International Lease Bonds, and a number of other short term bonds from entities like Caterpillar, GE, HSBC, etc, to fund my stock foray in early March that I detailed in the blog. The international lease bonds had held up pretty well so I was able to sell them at a small loss. I still own 1 American General and 1 International Lease bond maturing in 2011 that will be kept because it is too difficult to sell them at a fair price. The American General bonds have recovered since I wrote this post back in May. Bill Gross may share some of your sentiments, at least for the shorter dated securities as I have mentioned in the blog on a few occasions. This is not my cup of tea however.
ReplyDeleteAmerican general is losing large sums of money in its consumer finance operation. It files quarterly reports with the SEC and the losses are staggering in my opinion for a firm its size. This is a link to its 3rd quarter report. http://www.sec.gov/Archives/edgar/data/
25598/000002559809000050/cor0909.htm It reported a gain last quarter due solely to a 357.936 million dollar tax benefit.
The U.S. has not invested in American General but in its parent AIG. I do not have an answer but there is always a point when the best solution is for a subsidiary to file bankruptcy. I have no idea whether or not AIG will reach that point with Am General. I know for me, being a conservative cautious sort, that I am not personally interested in speculating in Am General bonds, though I recognize that money could have been made buying them in March for example and selling them now.