The Federal Reserve Bank of New York today moved ahead with its planned auction of $1.9 billion from its Maiden Lane III portfolio that include assets from the Altius I and Altius II CDOs.
Merrill Lynch, Pierce, Fenner & Smith emerged as the winning bidder. The Fed plans to auction off another approximately $5 billion in assets from Davis Square Funding I, II, III and IV on Friday.
AIG SunAmerica Chief Executive Officer Jay Wintrob said at a conference sponsored by Morgan Stanley in New York today that with proceeds from the completed ML III sales auctioned over the past months the Fed’s loan will be repaid. According to a Bloomberg report, Wintrob said that AIG will receive some of the proceeds from all future auctions.
The New York Fed created ML III to alleviate capital and liquidity pressures on AIG associated with credit derivative contracts written by AIG Financial Products (AIGFP).
According to data reported by the New York Fed, ML III LLC borrowed $24.3 billion, which, together with an equity contribution of $5 billion provided by AIG (equity interest), was used to purchase a portfolio of U.S. dollar denominated CDOs from certain counterparties of AIGFP.
AIG could receive the next $5.6 billion in proceeds from auctions of Maiden Lane III assets, according to the Bloomberg report. All other proceeds would be split with two thirds of the cash going to the Fed and one third going to AIG.
