AIG, Treasury offering 300M shares worth $9B

AP News
|
Posted: May 11, 2011 6:13 PM
AIG, Treasury offering 300M shares worth $9B

Bailed-out global insurance company American International Group Inc. and the federal government are offering to sell a total of 300 million AIG shares to the public.

The stock sale would be a big step by the government toward disentangling itself from the company. The government stepped in to rescue AIG from collapse with $182 billion in 2008 _ the biggest bailout of the financial crisis.

AIG and the government didn't specify a price for the shares in a regulatory filing on Wednesday. But 300 million shares of AIG were worth about $8.89 billion at Tuesday's closing price of $29.62.

AIG shares rose $1.03, or 3.5 percent, to close at $30.65 Wednesday.

AIG has seen its shares drop by more than 40 percent since hitting a high of $52.67 on Jan. 7. Last week the New York-based company reported a first-quarter loss, weighed down by the repayment of bailout aid and losses from Japan's earthquake and tsunami.

In March, AIG repaid the Treasury Department nearly $7 billion, trimming its outstanding balance to just under $60 billion. Treasury owns about 92 percent of AIG through its holdings of the company's common stock. The government expects to sell the shares over the next two years. Treasury officials have said they expect to recoup the full bailout amount.

The "break-even" stock price at which taxpayers would fully recover their investment is considered to be around $27 to $28.

As with the other financial bailouts, the government has to balance two objectives: ensuring maximum return on the taxpayers' investment while also getting the U.S. out of the business of owning private companies.

The filing says AIG is offering 100 million shares for sale and Treasury is offering 200 million shares. In addition, Treasury will give the underwriters an option to buy up to an additional 45 million shares to cover any excess demand.

AIG plans to use net proceeds of $550 million to pay for part of a lawsuit settlement, with the remainder for general corporate purposes.

Government auditors have said taxpayers might be repaid in full for the AIG bailout. The Government Accountability Office says the final cost of the rescue will depend on the strength of AIG's businesses and its share price. Overall its insurance business is stronger, mostly because of the federal money it received, according to the auditors.

Since 2008, AIG has sold 33 businesses and raised more than $57 billion in cash and securities. Last year alone, AIG raised more than $37 billion, primarily by selling two international life insurance divisions.

Bank of America Merrill Lynch, Deutsche Bank Securities, Goldman, Sachs & Co. and J.P. Morgan Securities LLC are serving as joint global coordinators for the stock offering. Barclays Capital, Citi, Credit Suisse Securities (USA) LLC, Macquarie Capital, Morgan Stanley, UBS Investment Bank and Wells Fargo Securities are the offering's joint bookrunners.

__

AP Business Writer Marcy Gordon in Washington contributed to this report.