Treasury launches sale of $6B of AIG stock
Thursday, March 8, 2012
WASHINGTON (AP) — The Treasury Department said Wednesday it is selling $6 billion worth of the $41.8 billion in common stock it holds in insurance giant American International Group Inc., which received the biggest bailout of the financial crisis in 2008.
The stock sale is a step by the government toward disentangling itself from AIG. It still owns 77 percent of the company’s common shares. Treasury said AIG plans to buy as much as $3 billion of the stock being sold.
Treasury also said it has a deal with AIG for it to repay the government’s remaining $8.5 billion preferred-stock investment in the company.
A price for the common shares wasn’t specified. The share price at which taxpayers would break even on their AIG investment is about $28 or $29. AIG shares closed at $29.45 in trading Wednesday. They fell 53 cents, or almost 2 percent, to $28.92 on heavy volume in afterhours trading following the announcement of the stock sale.
The government stepped in with $182 billion to rescue New York-based AIG from collapse in the depths of the financial crisis. Treasury has recouped $18 billion of the $68 billion it provided the company through its Troubled Asset Relief Program, or TARP. The remainder of the money came from the Federal Reserve Bank of New York. AIG has repaid all but $17.5 billion of those loans.
Treasury made an initial sale of AIG stock in May 2011. The sales were expected to resume after the value of AIG shares increased. Last year, the stock lost nearly half its value, partly fueled by government sales of the company’s stock and a volatile stock market.
Under the agreement for repaying the $8.5 billion preferred-stock investment plus interest, $5.6 billion will come from AIG’s newly announced sale of part of its stake in Hong Kong-based insurer AIA Group Ltd., $1.6 billion from a sale of securities by the New York Fed, and another $1.6 billion from AIG’s sale of its American Life Insurance Co. subsidiary.
“The people of AIG have achieved another significant milestone in our progress toward our goal that American taxpayers recoup their entire investment in AIG at a profit,” AIG President and CEO Robert Benmosche said in a statement.
AIG had a $19.8 billion profit in the fourth quarter of last year, nearly all of it due to a tax-related accounting gain. The company also earned $17.8 billion for 2011, its second straight year of profits.
Despite the two years of profitability, AIG’s recent financial results have been inconsistent. Over the past two years, only half of its quarterly reporting periods have been profitable.
Treasury said it has hired Citigroup Global Markets Inc., Credit Suisse Securities (USA) LLC and Morgan Stanley & Co. LLC as joint coordinators for the common stock sale.
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