American General Finance will be turned over from American International Group to Fortress Investment Group. Fortress has decided last Wednesday to buy the said consumer lending business, probably as a platform to acquire other struggling lenders.

Getting hold of other failed banks and businesses may mean funds for fixing one of American General Finances’ main problems, says independent fixed-income research firm CreditSights. Many investors, though, were disappointed with the decision – they were hoping that American General Finances will be sold to big banks or some other large strategic buyer – not like Fortress, which has been hurt tremendously by the financial bust. Investors say that a bank could fund American General’s finances through consumer deposits.

The general disappointment in the Fortress acquisition of American General was apparent in the bond performance after news was set. The company’s 5.4% bonds, with maturity date of 2015, went down from 88 cents to 83 cents on the dollar.

Executives over at Fortress, though, are optimistic. They are crossing their fingers that de-leveraging financial institutions will snap up assets that are up for sale. Buying off American General, known for selling consumer loans, is just the first step.

“AGF is well-positioned for significant growth in an under-served market,” says Fortress founder Wesley Edens. He says that with American General, they can serve the needs of consumers nationwide.

Rating agency Moody’s Investors Service is not too positive though, especially since American General has just been downgraded from B2 to B3. This is because, with the sale, American International Group will no longer be there to back up the business.

Another rain on Fortress’ parade is the fact that American General is now unable to package loans into securities and sell them to investors. Their securitization has been shut out, changing greatly their business model.

American General’s problems won’t be solved by Fortress. As CreditSights analysts Adam Steer, David Hendler and Peter Simon pointed out, “Fortress lacks a high rating necessary to kick-start AGFC’s funding platform, nor does it have a readily available platform to provide liquidity to AGFC.”

But all hope is not lost. Fortress can still finance American General through procurement of a community bank, which is a stable source of income. With a thousand banks facing failure of the current credit cycle, Fortress just may gain approval from the Federal Deposit Insurance Corporation to buy a failed bank. CreditSights still believe that, with Fortress’ help plus proper funding, American General Finance could still rise from its current state and be “a very attractive origination platform”.