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AIG stock swap moves it closer to repaying federal bailout

January 14, 2011|By Jim Puzzanghera, Los Angeles Times

Reporting from Washington — Treasury Secretary Timothy F. Geithner says the government "remains optimistic that taxpayers will get back every dollar of their investment in AIG."

Bailed-out insurance giant American International Group Inc. moved closer to repaying the government for its rescue by completing a stock-conversion deal with the Treasury Department on Friday — a key to unwinding the federal stake in the company.

Treasury converted the preferred shares in AIG it received as part of the complex bailout into 1.655 billion shares of common stock, increasing the government's ownership stake to 92% from 80%.

The department plans to sell the shares over time to recoup its investment, now estimated at $68 billion, and end taxpayer support of the company.

"Treasury remains optimistic that taxpayers will get back every dollar of their investment in AIG," Treasury Secretary Timothy F. Geithner said.

The government's return will depend on AIG's stock price, which is up about 89% over the last year. In November, the nonpartisan Congressional Budget Office estimated that the government would lose $14 billion of the $48 billion it gave AIG through the Troubled Asset Relief Program.

Altogether, AIG received federal aid commitments totaling $182 billion in a multistep bailout engineered by the Treasury and the Federal Reserve beginning in September 2008, when the company was near failure.

AIG received about $125 billion of that total, and has been selling assets to help repay the government.

The plan to end its bailout was announced in September.

As part of the recapitalization deal that closed Friday, AIG repaid $47 billion it owed the Federal Reserve Bank of New York, including the final $21 billion of a special $85-billion credit facility extended to the company.

"Today, AIG, with the support of countless people, has accomplished a huge goal that many people once thought impossible: completely repaying the Federal Reserve Bank of New York," said AIG Chief Executive Robert H. Benmosche.

"Now we will continue to focus on strong business performance for the benefit of all of our stakeholders, including our largest shareholder, the Treasury Department."

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