CrossProfit_

AIG Selloff Was Overdone; Shares Have 50% Upside - Barron's

We agree, however the question is not 'if' but 'when'. We recently lowered the CrossProfit e-line from $70 to $60 (30% gain) over the next 6 months or so, reflecting the uncertainties.

In our opinion, the remaining 20% gain will come only after the CDO issue is totally under control and there are no more surprise write downs by anyone for at least a full quarter.

See www.crossprofit.com/vi... for details.

The longer the 'financials' drag out the write downs, the longer it will take to restore confidence in the system.

Likewise, articles appeared in the press lately saying that lawyers are advising private equity and other buyers to renege on their acquisition commitments and just pay the reverse break-up fee, simply because the debt is selling at $0.80 to the $1. Essentially they are advising the system to shoot itself in the leg. There is a big difference if a buyer wants out because the company is no longer worth what they offered for it and between a deal getting canceled because the banks can not turn over the debt at a profit.

The former is legitimate and is the purpose of a reverse clause. The latter, well if the buyer still deems the acquisition worthy and the buyer is the one that has to pay off the debt, canceling a deal because a bank can not book an immediate profit is not the intent of a reverse cancellation fee clause.

The only resulting consequence would be further pressure on already existing debt somewhat similar to a run on a bank. Should any of the bankers attempt to pull off a stunt like this, expect everyone to take a hit, including AIG.

CrossProfit (consensus)