US Investment In AIG Continues To Drop
During the financial crisis, overall support for American International Group, Inc. (“AIG”) through the US Department of the Treasury and the Federal Reserve Bank of New York (“FRBNY”) totaled approximately $182 billion. Now, the government has announced an agreement to sell over 160 million additional shares of its AIG common stock, for about $5 billion, which will reduce the remaining government investment related to AIG down to $39 billion – a 79 percent reduction from the original $182 billion commitment.
The current sale by Treasury is of 163,934,426 shares of AIG common stock at $30.50 per share in an underwritten public offering. The aggregate proceeds to Treasury from the common stock offering are expected to be approximately $5.0 billion. As part of Treasury’s offering, AIG agreed to purchase 65,573,770 shares at the public offering price of $30.50 per share – representing $2 billion of Treasury’s expected proceeds from the sale. Treasury has granted underwriters a 30-day over-allotment option with respect to approximately 24.6 million additional shares of AIG common stock.
“We’re continuing to make significant progress exiting our investment in AIG,” said Assistant Secretary for Financial Stability Tim Massad. “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.”
This common stock offering (assuming no exercise of the underwriters’ over-allotment option) will reduce Treasury’s remaining investment in AIG to $30.7 billion, consisting of 1.084 billion shares of common stock; and Treasury’s percentage ownership of AIG’s outstanding shares of common stock will also decline from approximately 70 percent to 63 percent. In addition, the FRBNY has a remaining loan to Maiden Lane III totaling approximately $8 billion, without giving effect to the recently announced sales. That FRBNY loan, plus accrued interest of approximately $700 million, is collateralized by assets with a current value well in excess of the outstanding loan balance.
BofA Merrill Lynch, Barclays, Citigroup, Credit Suisse, Deutsche Bank Securities, Goldman, Sachs & Co., J.P. Morgan, Macquarie Capital, Morgan Stanley, UBS Investment Bank and Wells Fargo Securities acted as Joint Book-Runners for the offering. Greenhill & Co. continues to serve as Treasury’s financial agent with respect to the management and disposition of Treasury’s investment in AIG.