[WASHINGTON] The US Treasury Department agreed to sell US$5 billion of shares in American International Group in a stock offering, with the bailed-out insurer buying US$2 billion of the total.
The Treasury is selling 163.9 million shares at US$30.50 each, compared with the May 4 closing price of US$32.83, the department said in a statement on Sunday.
The transaction, the government’s third offering of AIG’s shares since last May, reduces the Treasury’s stake in the insurer to 63 per cent from 70 per cent, according to the statement.
Chief executive officer Robert Benmosche, 67, has sold assets to help raise funds to buy back shares from the US.
The company said in March that dividends from insurance subsidiaries along with proceeds from divesting a plane-leasing unit, a stake in Hong Kong-based AIA Group and other holdings will allow it to generate as much as US$30 billion that could be returned to shareholders by the end of 2015.
“The company has been able to monetise sales of non-core assets and we expect this to continue for the longer term,” JPMorgan Chase & Co analysts led by Arun Kumar said in a note to clients on May 4, before the sale was announced.
The Treasury raised US$5.8 billion in the first offering in 2011. At the same time, New York-based AIG sold 100 million shares for US$2.9 billion to demonstrate access to the capital markets and satisfy a condition of its bailout.
The insurer bought half of the US$6 billion in shares the department divested in March. The day before that offering was announced, AIG raised about US$6 billion by selling part of its AIA holding.
Treasury divested its first two chunks of AIG stock at US$29 a share. The government needs to average US$28.72 to break even on its investment. The insurer is responsible for paying the Treasury’s underwriting fees to banks.
The US rescued AIG in 2008 as the New York-based firm was overwhelmed by losses on bets tied to mortgages. Its bailout swelled to US$182.3 billion as the government extended more credit and reduced the interest charged.
The insurer paid back the balance on a Federal Reserve credit line and the Treasury converted its preferred stake into 92 per cent of the common stock in January 2011.
The government’s remaining investments in AIG total US$39 billion after the share offering announced on Sunday, according to the Treasury.
“We’re continuing to make significant progress exiting our investment in AIG,” Tim Massad, the assistant secretary for financial stability, said in the statement.
Underwriters have the option to sell 24.6 million additional shares of AIG common stock, the Treasury said. – Bloomberg