AIG Restructuring Chief Reynolds Has Tough Job in Tough Market

By Jui Chakravorty Das | March 3, 2009

Paula Rosput Reynolds has a job that would daunt some of the most experienced Wall Street veterans — restructuring American International Group Inc. by selling assets in the midst of a severe credit crunch.

Reynolds, 52, was appointed AIG’s chief restructuring officer in October, just after what was once the world’s largest insurer was saved from collapse by a federal package that had swelled to $150 billion in November.

Reynolds is running dozens of simultaneous auctions around the world as she tries to shed about two-thirds of AIG, including insurance companies, consumer lenders, asset management units and an aircraft-leasing business.

Now, in part because those assets aren’t selling as well as AIG had hoped, the government is again having to revamp the rescue package, sweetening its terms so it can remain viable.

Selling assets amid tight credit markets has been a tough task even for Reynolds, who as CEO of auto insurer Safeco Corp., oversaw its sale at a 51-percent premium in April last year.

“It’s a very, very tough job because she’s a motivated seller with very few motivated buyers in the market,” said Donald Light, senior analyst at Celent’s insurance group.

“The number of transactions that have occurred indicates how difficult an environment it is that she is operating in.”

Since joining the company, Reynolds has sold a few small units but has yet to find buyers for some of its biggest assets, including AIG’s life insurers in various parts of the world and its aircraft leasing company.

The stakes are high for Reynolds. AIG Chief Executive Edward Liddy has pledged to repay “every penny” to the government, which gained control of about 80 percent of AIG’s voting shares as part of the $150 billion bailout.

Reynolds, who hails from the wealthy enclave of Newport, Rhode Island, started her career at a Massachusetts consulting firm after majoring in economics at Wellesley College.

She rose through the ranks at AGL Resources Inc, reaching the top spot at the Georgia gas distributor in 2000.

In 2004, she married Stephen Reynolds, chief executive of Washington-based Puget Energy Inc.

She decided to accept the job of running Safeco the following year in an effort to move closer to her husband.

SALE CRITICIZED

Given her lack of experience in insurance, analysts were skeptical. Many also criticized her for the sale of Safeco.

“In what can only be seen as a vote of ‘no confidence’ on her own efforts, Reynolds’ first act as chair was to sell the company,” Brian Sullivan, founder of Risk Information, an auto insurance publication, wrote in a newsletter in May last year.

“Safeco could have stood on its own had it been well run. There was still much work to be done and the new management team couldn’t – or wouldn’t – do it,” he wrote, referring to Reynolds and board members.

Others look at her experience of getting that deal done as a possible advantage in her current job.

“She doesn’t have an insurance background per se,” said Rob Haines, senior insurance analyst at CreditSights.

“It’s always better to have somebody with a strong background in the businesses they are attempting to sell but you have to give her credit; she did sell Safeco.”

After selling Safeco to Liberty Mutual Group for $6.2 billion in April last year, Reynolds took a severance package and left.

In October, she took on the responsibility of restructuring AIG. As AIG is based in New York, she commutes back to Seattle many weekends.

More than $40 billion of assets remain to be sold.

“It’s a thankless job,” Haines said. “And for the time-being, it’s an almost impossible one.”

Was this article valuable?

Here are more articles you may enjoy.