BANK OF IRELAND Private Banking has insisted its property investments with the troubled insurance giant, American International Group (AIG), which was last week thrown an $85 billion lifeline by the US Federal Reserve, are safe and will remain unaffected by the firm's potential change of ownership.
Over the past two years the bank has built up a €150 million exposure on behalf of its private clients to property funds that are managed and partly owned by AIG's global investment arm.
In August last year the bank's private clients stumped up €100 million for AIG's highstar capital, a buyout fund that targets infrastructure investments and related companies; while in October 2006, Bank of Ireland Private Banking sunk €50 million of its private clients' money into a joint venture project with another AIG fund (global real estate) to develop an International Financial Centre (IFC) in South Korea.
But the Federal Reserve's unprecedented bailout of the company means AIG is on the brink of nationalisation as the $85 billion loan gives the US government the right to take an 80 per cent stake in the firm. A group of shareholders is now preparing to sell off the insurance behemoth's assets in a bid to avert government ownership.
According to Peter Collins, head of property at Bank of Ireland Private Banking, this turmoil at the top of AIG does not affect its investments in the insurance group's highstar and global real estate funds. He said the "key point here is that the underlying assets are not affected as they are not part of the AIG group, they are managed by a subsidiary of the company". And he added that although it is "never helpful to have a change of ownership at the top of the business, I can't see how it would affect a very profitable and sustainable subsidiary".
Both AIG's highstar capital and global real estate funds are managed by AIG Global Investment Corp, the investment management division of AIG.
Last June, AIG's highstar capital sold its 50 per cent stake in global energy producer Intergen for $1.1 billion to GMR, the Indian infrastructure group. Lehman Brothers advised the insurance company's subsidiary in the deal.
AIG's global real estate fund is spearheading the development of Seoul's IFC which is located in Yeouido, a leading financial district within South Korea's capital.
The mixed-use scheme - which will comprise approximately 529,550sq m (5.7 million sq ft) of office, retail and entertainment facilities, including a 450-bedroom five-star hotel - is expected to be worth €1.6 billion by the time it is completed in 2013.
