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U.S. sale of AIG stock to bring back $5 billion in bailout money

May 06, 2012|By James S. Granelli
  • The U.S. Treasury's sale of AIG stock Monday will bring down AIG's debt to taxpayers to $39 billion from more than $182 billion that the Treasury and the Federal Reserve had pledged in a multi-step bailout starting in September 2008.
The U.S. Treasury's sale of AIG stock Monday will bring down AIG's… (Justin Lane / EPA )

The U.S. Treasury is taking another step to unwind its unprecedented 2008 bailout ofAmerican International Group Inc.by selling about $5 billion more of the insurance giant's shares and reducing its stake in the New York company to 63%.

Thanks to AIG's rising stock price -- up 41.5% this year -- the government was able late Sunday to price 164 million shares it plans to sell Monday at $30.50 each.

The sale brings down AIG's debt to taxpayers to $39 billion from more than $182 billion that the Treasury and the Federal Reserve had pledged in a multi-step bailout starting in September 2008. The government shelled out $125 billion, picking up a 92% stake in the company.

“We remain hopeful that taxpayers will ultimately recover every single dollar invested in the company, which is something few would have expected during the depths of the financial crisis,” said Assistant Secretary for Financial Stability Tim Massad.

Government officials have said they expect to recoup all the taxpayer money injected into AIG, and the company's performance lately makes it more likely than it seemed four years ago. The company's net income for the first quarter climbed to $3.2 billion, or $1.71 a share, from $1.3 billion, or 31 cents a share, in the year-earlier quarter.

As part of the Treasury’s offering, AIG agreed to purchase nearly 65.6 million shares at the offering price, providing $2 billion of the expected proceeds.

The common stock offering will reduce Treasury’s remaining investment in AIG to 1.1 billion shares, worth about $30.7 billion. The government's stake could be reduced further in the next month if underwriters decide to purchase about 24.6 million more shares as part of a so-called over-allotment option for them.

AIG shares hit a high for the year Thursday at $34.76, but fell $1.31 on Friday to close at $32.83, leaving it with a year-to-date gain of 41.5%.

A year ago, the government picked up $5.8 billion in the sale of AIG stock. And the company has been paying back money as it sold some of its assets, such as 21st Century Insurance Co., a Woodland Hills auto insurer that AIG sold to Farmers Insurance Group in Los Angeles two years ago for $1.9 billion.

AIG retains a strong Southern California presence with subsidiaries SunAmerica Inc. in Los Angeles, which sells retirement annuities, and International Lease Finance Corp. in Century City, which leases aircraft.

The company has been one of the key targets of public anger over the billions of dollars spent to bail out Wall Street companies and two of the nation's three automakers. AIG had its tentacles so intertwined in the worldwide financial structure that its near-failure from risky securities deals helped lead to the global credit crisis that deepened the recession.

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