AIG Share Sale a Drop in the Bailout Bucket
After Wednesday's announcement of a $6 billion sale of AIG shares and an agreement to receive $8.5 billion in additional payments, Uncle Sam still has $41.8 billion sunk into the insurance giant as a result of its 2008 bailout.
|AIG CEO Robert Benmosche|
It means that even after years of asset sales and public offerings of business units, AIG is far from repaying the government.
In two separate deals announced Wednesday, the Treasury is set to get an additional $14.5 billion returned from AIG on its bailout investment, which at its peak totaled $182.3 billlion, or a 92% stake.
AIG will buy $3 billion worth of the company's shares at $29 in an overall $6 billion offering of shares by the Treasury. The price of the offering is pegged to at the same price as a May 2011 AIG initial public offering, where the Treasury pared its stake in the insurer to 77%.
Still, the Treasury's remaining outstanding investment in AIG will total approximately $41.8 billion following the share sale, according to a press release. In addition, the Federal Reserve Bank of New York holds a $9.3 billion loan to AIG through its Maiden Lane III vehicle. That loan is collateralized by assets with a current value well in excess of the outstanding loan balance, according to the statement.
After a near 30% surge in 2012, the Treasury's move signals that it waited for AIG's stock to recover to levels from its 2011 share offering before selling additional stock. In after-hours trading, AIG shares fell over 1% to $29.04, just above Wednesday's share offering price.
Aside from the common stock share sale, AIG is expected to return $8.5 billion to the Treasury as a result of a series of 2011 and 2012 asset sales. AIG will be returning $5.6 billion to the government using proceeds from its recently announced sale of shares at its Asian insurance unit AIA.
Another $1.6 billion in expected from proceeds on a Feb. 28 sale of securities held by the Federal Reserve in its Maiden Lane II AIG bailout vehicle. That sale is expected to net the Fed a $2.8 billion gain, on increasing values of the underlying assets. The final $1.6 billion will come from AIG's sale of its American Life Insurance to MetLife(MET) .
To wind down a conglomeration of businesses and repay bailout loans, AIG has been one of the biggest sellers of assets since the financial crisis.