Troubled insurance giant American International Group has hired JP Morgan Chase to advise on raising new capital or come up with some kind of deal that infuses the company with enough money to prevent a possible dowgrade, CNBC has learned.
The plan to raise money could be announced this weekend, said two sources with direct knowledge of AIG's efforts.
It comes as shares of the insurance giant fell around 30% amid worries that the firm might be downgraded by rating agencies because of the deteriortaing condition of its balance sheet.
A downgrade could be devestating for AIG, forcing the insurance giant to post collateral in the billions of dollars on certain complex derivative transactions known as "swaps."
A spokesman for AIG confirmed that the firm is "working around the clock" to raise money. "We are working with a number of parties and we are working on a number of collateral options," he said.
In addition to JP Morgan , AIG is also working with BlackRock to possibly raise capital or come up with a creative way to bolster its balance sheet.
The firm might also sell assets, people close to the company say.
AIG CEO Bob Willumstad is planning to announce a major reorganization of the company of September 25. But the events of the past few days has forced Willumstad to move faster.
Shares of AIG dropped significantly Friday as shares of other major financial players, lehman Brothers and Washington Mutual in particular, continue to flounder.
Lehman Brothersis in talks to sell itself before the end of the weekend because of bad debt on its books, and Washington Mutual is also in desperate need of a buyer.
CNBC has learned that JP Morgan is interested in buying at least piece of Washington Mutual, but that the two firms are not in advanced deal talks.
JP Morgan is waiting for the firm's stock to stop falling or a government takeover of the bank because of the bad loans on its books, before making a bid, people close to the firm say.
Other banks are interested in Washington Mutual as well, these people add,