AIG posts 500 million pound collateral on Canary Wharf leases

Marketwatch ^ | March 26, 2009 5:25 a.m. EDT | Jonathan Buck

[Ernest_at_the_Beach]

LONDON (MarketWatch) -- American International Group Inc has been forced to post more than GBP500 million as collateral to cover possible defaults on rental payments on properties in Canary Wharf leased by Lehman Brothers Holdings Inc. and Citigroup Inc. The move was triggered by a fall in the credit rating of AIG, which provides securitization to insure the leases.

AIG posted cash collateral of approximately GBP224 million to cover Lehman's lease on 25-30 Bank Street and GBP276.3 million to cover Citigroup's rental obligations at 33 Canada Square.

There is no suggestion that either tenant is likely to default, even though Lehman entered administration Sept. 15.

[Ernest_at_the_Beach]

Wonder if anyone say this coming...that is a good sized pile of cash.

[GeronL]

wow... taxpayer dollars at work.

where is ACORN on this?? Thats a lot more than the bonuses

[Ernest_at_the_Beach]

anyone SAW this coming!

[Ernest_at_the_Beach]

I bet there is a lot more of this kind of stuff...

[PubliusMM]

Wonder where that money is coming from...

[GeronL]

how much “bailout” money is leaving the country??

[rockinqsranch]

I would believe it as something one could have foreseen within AIG circles. “H” long established companies with long established credit lines are being forced to pay up front for product to sell, or to pay COD these days. A bit of a clue there as to trust in the market.

One might think it time for AIG to consider a low rent district for their offices.

[Ernest_at_the_Beach]

This is not money for their offices,...it is some kind of insurance for officies for Lehman Brothers...which is Bankrupt...and Citigroup..

At least as I read it.

[Ernest_at_the_Beach]

Check your pay Stub....

[JasonC]

Correct.

It seems that remarkably few people around here know what "underwriting" is...

[OCC]

At Bank Street, where Lehman leases more than a million square feet of office space

Thats a lot of cubical space!

[JasonC]

Hardly. Collateral isn't a cost. AIG has investments, in bonds or whatever, and it simply pledges some of those as collateral, that Lehman or Citi will pay their leases as due. AIG still owns those investments, and still earns all the interest on them. It is also collecting its underwriting fees for guaranteeing the payments if either Lehman or Citi break their leases. None of this is a cost.

[Ernest_at_the_Beach]

So Lehman is still paying their lease?

[rockinqsranch]

OK...Gotcha. I have been scanning as I have to get out of here for a few hours, so I’ll look at this again later as I should have in the first place LOL.

Offline for a few.

[JasonC]

Yes of course. The brokerage division was sold to Barclay's.

[Ernest_at_the_Beach]

Hmmm....

Lehman Brothers Holdings Inc. has filed for bankruptcy protection in the U.S.

*********************************************

Lehman Brothers Holdings Inc. has filed for bankruptcy protection in the U.S.

SEE BELOW FOR MORE INFORMATION ON LEHMAN BROTHERS HOLDINGS INC. AND THE DISPOSITION OF BUSINESSES AND
SUBSIDIARIES OF LEHMAN BROTHERS HOLDINGS INC.

Barclays acquires Lehman Brothers, North America		Lehman Brothers Holdings Inc.		Information on other former Lehman Brothers businesses
For information regarding Barclays Investment Banking and Capital Markets, please visit www.barcap.com For information regarding Barclays Wealth, please visit www.barclayswealthamericas.com		For information regarding the Chapter 11 Filing, please visit www.lehmanbrothersestate.com		For information related to Neuberger Berman, please visit www.nb.com For inquiries related to companies in the UK and Europe in administration, please contact PricewaterhouseCoopers LLP at www.pwc.co.uk For information related to the acquisition of Lehman Brothers Asia-Pacific business, please view Nomura press release or visit www.nomura.com For information related to companies in Hong Kong in administration, please view KPMG News or contact KPMG at http://www.kpmg.com.hk

The information and links above are provided solely as a convenience to assist users who may be seeking information on Lehman Brothers Holdings Inc. or former Lehman Brothers businesses and operations. The owner of this website does not endorse nor is responsible for any content, information or other related materials that maybe accessed through the links above or has been provided by unrelated parties.

[Ernest_at_the_Beach]

Just looking thru info...see #17...wonder if Barclays is occupying the space in London or whether it is Price Water House....

[marshmallow]

The WSJ reporting that the collateral on Lehman's lease is held in AIG bank accounts at the London branch of the Bank of New York Mellon. According to a previous filing, AIG Financial Products Corp. supplied the securitization of the leases through credit-default swaps.

Collateral isn't a cost but the thing that caused the need to post it (a downgrade in credit ratings) can indeed be costly as it may lead to reduced credit availability. In the case of AIG, however, that shouldn't be a problem as any slack will simply be picked up by you and me.

[SunkenCiv]

One sidelight question — Canary Wharf... how do they keep the canaries from flyin’ off before they get ‘em unloaded?

Thanks Ernest.