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U.S. to sell more of its AIG stake

The Treasury Department will sell $18 billion of its shares in American International Group, which would reduce the government's holdings to a minority stake.

September 10, 2012|By Ronald D. White, Los Angeles Times
  • The U.S. government acquired a 92% ownership stake of American International Group when it bailed the company out in September 2008. Since then, the Treasury Department and the Federal Reserve have been unwinding that stake through periodic sales.
The U.S. government acquired a 92% ownership stake of American International… (Justin Lane / EPA )

The U.S. government is selling an additional $18 billion of its shares in insurer American International Group Inc., the company and the Treasury Department announced Sunday.

The sale would reduce the Treasury Department's holdings to less than a majority stake in the company.

The U.S. had acquired those shares after it pledged more than $182 billion to bail out AIG in exchange for a 92% ownership stake in September 2008, when the company nearly collapsed, marking the largest corporate rescue of the global financial crisis.

AIG ended up using about $125 billion of the amount pledged.

Since then, the Treasury Department and the Federal Reserve have been unwinding that stake through periodic sales.

The latest sale will mark the government's fifth sale of AIG stock in the last two years. In August, the U.S. sold $5 billion of the company's stock, reducing its stake in the company to 55% from 61%.

The Federal Reserve said in August that U.S. taxpayers had earned $17.7 billion from the central bank's role in bailing out the insurance giant.

As has been the case in past sales, the shares will be sold to institutional investors. AIG said it would buy back $5 billion worth. The price has not been determined.

If there is more demand for the AIG shares, the company said the government would grant the underwriters a 30-day option to buy as much as $2.7 billion more of its shares in the company.

AIG, which serves customers in more than 130 countries, said Citigroup Inc., Deutsche Bank Securities Inc., Goldman, Sachs & Co. and J.P. Morgan Securities have been retained as joint global coordinators for the offering.

On Friday, AIG shares closed at $33.99, up 47% this year. If the proposed sale were to occur at Friday's closing price, the U.S. would end up with a 23% stake in AIG, according to data compiled by Bloomberg.

The first two AIG stock sales went for $29 a share and next two at $30.50.

ron.white@latimes.com

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