BP plc (ADR) (BP), ViaSat, Inc. (VSAT), American International Group Inc (AIG): Seth Klarman Is Betting on These Stocks

Divestiture with debt restructuring

American International Group Inc (NYSE:AIG) plans to improve its operating margin by focusing on its main core insurance business and reducing its debt load.  In December, the company divested 80% of its wholly owned subsidiary, International Lease Finance Corporation, or ILFC, for $4.23 billion. ILFC is American International Group Inc (NYSE:AIG)’s aircraft leasing unit.

The company plans to sell an additional 9.9% of ILFC by July 31, 2013 for a total of $5.28 billion, it will retain a 10% ILFC stake. The remaining stake will contribute $40 million to AIG’s annual earnings. The company considers this divestiture a positive move, as it will enable it to apply these funds toward the enhancement of its core insurance business. With these moves American International Group Inc (NYSE:AIG) will enhance its EPS to $4.10 this year and $4.85 by 2014.  Currently American International Group Inc (NYSE:AIG) is earning $3.93 per share.

American International Group Inc (NYSE:AIG) is looking to reduce its interest burden and improve its interest coverage ratio. In March, it redeemed 7.7% Series A-5 Junior Subordinated Notes due in 2047, amounting to $1.1 billion. Furthermore, on June 17, 2013, it also redeemed the entire outstanding balance of 6.45% Series A-4 Junior Subordinated Notes, at 100% principal amount, with accrued interest on it. These debentures were of worth around $750 million.

Because of these redemptions, the company has reduced its interest burden by more than $100 million annually. It will use these savings to enhance its core insurance business, which should help it generate more growth opportunities.

Conclusion

BP plc (ADR) (NYSE:BP)’s strategy of increasing its stake in Rosneft and expanding its production in Rumaila will support increasing company revenue. ViaSat, Inc. (NASDAQ:VSAT)’s performed well in the last quarter and it expects to do better in the years ahead. American International Group Inc (NYSE:AIG)’s debt restructuring plan and divestiture of ILFS will improve its operating margin, and will allow the company to focus on its core insurance business.

These top holdings of Baupost are expected to perform well in the future and will definitely drive the funds growth.  Perhaps you should take a look as well.

The article Seth Klarman Is Betting on These Stocks originally appeared on Fool.com and is written by Madhu Dube.

Madhu Dube has no position in any stocks mentioned. The Motley Fool recommends American International Group. The Motley Fool owns shares of American International Group and has the following options: Long Jan 2014 $25 Calls on American International Group. Madhu is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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