By Brai Odion-Esene

WASHINGTON (MNI) – The New York Federal Reserve Bank Wednesday said
it is looking into potentially selling some of the assets in the
portfolio of the third incarnation of its Maiden Lane accounts, this one
set up to bail out insurance giant AIG during the financial crisis.

“The change in the investment objective for ML III reflects a
strategic decision to explore possible sales of some of the assets in
the portfolio in light of improving market conditions and the success of
the ML II sales,” a spokesperson for the NY Fed said in a statement to
MNI.

“The Fed will only transact if it deems that a particular
transaction represents good value, is done competitively and is not
market disruptive,” the statement added.

The fair value of the ML III portfolio, as of March 28, is $17.5
billion according to the New York Fed.

The objective for Maiden Lane, managed by BlackRock, posted on the
New York Fed’s Web site states it would be to “repay the New York Fed’s
senior loan (including principal and interest), followed by AIG’s equity
interest (including accumulated preferred distributions representing
interest) for as long as the United States Treasury maintains an
economic stake in AIG on behalf of the United States taxpayer, while
also striving to maximize sale proceeds and refraining from disturbing
general financial market conditions.”

The New York Fed created Maiden Lane III in November 2008 to
alleviate capital and liquidity pressures on AIG stemming from credit
default swap contracts by purchasing $29.3 billion in multi-sector
collateralized debt obligations from certain counterparties of AIG
Financial Products Corp., enabling AIGFP to terminate the associated
CDS.

The New York Fed lent ML III LLC approximately $24.3 billion. AIG
contributed $5 billion of equity. According to the New York Fed, as of
March 28 the outstanding principal amount of the loan is $8.3 billion,
while accrued interest payable is $721 million.

This is not new ground for the New York Fed. On February 28, it
announced the sale of the remaining securities in the Maiden Lane II LLC
portfolio, resulting in the full repayment of the $19.5 billion loan
extended by the New York Fed to ML II and generating a net gain of
approximately $2.8 billion, including $580 million in accrued interest
on the loan.

** MNI Washington Bureau: 202-371-2121 **

[TOPICS: M$U$$$,MMUFE$,M$$FI$,M$$DR$,MK$$$$]