MOODY’S CUTS AIG LENDING UNITS CLOSE TO JUNK STATUS

Rating firm Moody’s Investors Service at the weekend downgraded AIG’s American General Finance and International Lease Finance Corp units a single notch to Baa3 and warned of further downgrades. The ratings on the two companies would be in junk territory if not for support received from AIG, Moody’s said. Moody’s expressed concern over American General’s funding profile and operating pressures, noting that the company has $4.5bn in debt due by next July. Moody’s noted that American General increasingly had obtained funding through bank loans, securitization and asset sales owing to trouble obtaining financing through its long-time source, public unsecured debt. For International Lease, Moody’s said that the company would likely see lowered access to unsecured debt to help fund its $44bn book of commercial aircraft after AIG’s planned sell-off of the unit. “Though ILFC’s performance during the downturn has been resilient to date, our view is that higher wholesale funding risks will require that ILFC transition to financing alternatives that could limit its financial flexibility when compared with traditional unsecured sources”, Moody’s said.