AIG, Goldman Unwind CDS Positions: Report
NEW YORK (
) --
American International Group's
(AIG) - Get Report
derivative unit has terminated most of its soured mortgage trades with
Goldman Sachs
(GS) - Get Report
still left after the insurer was bailed out by the U.S. government in 2008, the
Wall Street Journal
reports, citing people familiar with the matter.
The move by AIG Financial Products to unwind credit-default swaps insuring about $3 billion of mortgage-asset pools, called Abacus, arranged by Goldman caused AIG to realize a $1.5 billion to $2 billion loss last year, these people said, the
Journal
says.
AIG Financial Products currently has roughly 14,400 outstanding derivative trades on interest rates, currencies, bonds and other instruments, with a notional value of about $770 billion, down from more than $2 trillion before September 2008, a source told the newspaper.
AIG still has outstanding credit-default swaps with Goldman on $1.3 billion in Abacus CDOs, some of which are tied to the performance of commercial-real-estate bonds, people familiar with the trades told the
Journal
.
AIG and Goldman last year agreed to tear up $3 billion in swap contracts at market prices. Goldman got to keep between $1.5 billion and $2 billion of cash collateral, and AIG realized that amount as a loss, the
Journal
reports.