American International Group CEO Edward Liddy's testimony on Wednesday before the U.S. House Committee on Oversight will focus on the insurer's attempt to set up SPVs (Special Purpose Vehicles) to offload some of its assets and pay back the federal government, BNET Financial has learned.
Liddy will tell Congress that he is resisting pressure to divest the once-trillion-dollar corporation's assets at "fire sale" prices even though the federal government committed more than $170 billion to save AIG from bankruptcy because "we intend for taxpayers to realize the fullest possible value."
An SPV is a company with a limited life span and limited purpose, usually set up by a corporation to isolate it from problems elsewhere in the organization until it can be sold.
"We must take the time and exercise the diligence to do this restructuring properly," Liddy's proposed testimony says.
AIG is shifting two of its foreign life insurance operations, American Life Insurance Co. and American International Assurance, into SPVs in exchange for a reduction in its debt to the Federal Reserve Bank of New York. The transaction should be completed in the "near future," according to the testimony.
The AIG CEO will also tell Congress that its global property and casualty company, AIU Holdings, will become an SPV so as to protect its business for a potential sale of a minority stake, which may ultimately include a public offering depending on market conditions.
Liddy will testify that AIG has unwound the troubled derivatives portfolio at AIG Financial Products, and that the unit will be phased out once all the positions are closed out. "We have reduced (our) ... risk positions from 44,000 to 27,000 ... and notional exposure from a peak of approximately $2.7 trillion to approximately $1.5 trillion today," he will go on to say. "We continue to explore multiple options to break apart these trading books."
Earlier today AIG announced the sale of its Tokyo headquarters, the Otemachi Building, to Nippon Life Insurance Co., Japan's largest life insurer, for $1.2 billion.
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