AIG to sell $600m in LP commitments

The troubled financial institution is shopping two partially drawn bundles of commitments made in conjunction with a fund of funds that is part of AIG Investments, now spinning out.

AIG is selling just over $600 million in limited partner commitments from its balance sheet, although the partnership interests are only partially called.

UBS is brokering the sale, which consists of underlying interests in various private equity funds, including funds managed by The Blackstone Group, Ares Management, Silver Lake and Clayton Dubilier & Rice.

The struggling financial giant, now undergoing restructuring at the direction of the US government, warehoused two large pools of commitments on its balance sheet on behalf of its fund of funds division of AIG Investments, an asset management arm that is being sold to Pacific Century Group, the investment firm of Hong Kong billionaire Richard Li.

The first bundle of LP interests comes from a roughly $350 million commitment AIG made to AIG Private Equity Portfolio V, which was targeting a total of $750 million. That fund of funds was about halfway through fundraising in the autumn of 2008 when the financial markets melted down after Lehman Brothers went bankrupt. AIG was contractually obliged to commit the capital to the vehicle.

About half of the $350 million in commitments has been called down, according to a source with knowledge of the situation.

The net asset value of the roughly $180 million that has been called is about $160 million, the source said.

The second bundle AIG is selling consists of $240 million of commitments AIG made from its balance sheet to various general partners, which AIG intended to transfer to a sixth fund of funds. That fund has not been launched.

About 25 percent – or $60 million – of the $240 million has been drawn, the source said. The net asset value of the $60 million is estimated to be between $50 million and $55 million.

The offering represents all of the warehoused fund of funds assets AIG has on its balance sheet, though a number of AIG subsidiaries still hold stakes in various private equity funds, according to a source.

One source in the secondaries market said the AIG offering will likely transact on a market that has only slowly been closing the bid-ask gap.

“[AIG is] a motivated seller, with realistic expectations,” the source said.

Pacific Century agreed in September to buy AIG’s asset management units that are part of AIG Investments, including platforms for managing secondaries, co-investment and infrastructure assets, for $500 million. The $500 million price tag includes a $300 million cash payment and performance-based payments.

The US government has committed $183 billion to AIG so far to save the company from failing. AIG, which has used about $83 billion of the funds, has been selling assets to pay back the government.