WASHINGTON (AP) - The government is selling off a chunk of its stake in American International Group Inc., narrowly squeezing out a profit as it moves to bring an end to its bailout of the insurance giant.
The New York company and the Treasury Department said they were selling 300 million shares of AIG at $29 each. The per-share price was the low end of the insurer's expected $29 to $30 dollar range but just above the $28.73 price per share that the government needs to recoup its investment in the company.
Treasury said in a statement late Tuesday that the government could get gross proceeds of $7.1 billion if the underwriters exercise their option to buy an additional 45 million shares owned by the government. The sale included 200 million shares sold by the government and 100 million shares held by the company.
The stock sale represents a crucial step in the government's effort to exit its ownership of AIG Inc., which received a bailout package of more than $182 billion during the financial crisis that hit with force in the fall of 2008.
When this week's sale closes, government's stake in AIG will drop from 92 percent to 77 percent.
"Today's announcement represents an important milestone as we continue to exit our stake in AIG and wind down TARP," Treasury Secretary Timothy Geithner said in a statement, referring to the government's Troubled Asset Relief Program.
The $700 billion TARP was authorized by Congress in October 2008 and it provided billions of dollars in support to banks, auto companies and AIG.
"The decision to provide this assistance was exceptionally difficult, but it's clear today that it was essential to stopping a financial panic, preventing a severe economic collapse and helping to save American jobs," Geithner said.
The global insurance company, based in New York, has seen its shares drop by about half since hitting a 52-week high of $52.67 on Jan. 7. AIG closed at $29.46 on Tuesday, a drop of 52 cents from Monday's closing price.
Tim Massad, Treasury's acting head of the TARP program, said that with the sale of the AIG shares on Tuesday and the payment by Chrysler of its government loans, Treasury has now recovered more than 75 percent of the money invested in the bailout effort.
Going forward the government will continue to reduce its stake in AIG in "an orderly manner," Massad said in a conference call with reporters. He said that the next sales of AIG stock will not occur for at least 120 days, a period during which the government agreed to refrain from further sales.
Massad refused to predict whether the government will eventually turn a profit on its AIG investment.