| US Treasury to raise $5b via AIG stock sale |
WASHINGTON The US Treasury Department said on Friday it expects to raise $5 billion from its sale of American International Group stock, cutting the government’s stake in the bailed-out insurer to 55 per cent.
The sale, which would bring a profit of about $300 million to the US Treasury, comes as President Barack Obama campaigns for a second term and has been forced to defend his administration’s decision to use taxpayer money to prop up companies during the crisis.
The Treasury Department priced the offering at $30.50 a share, 6 per cent above the $28.72 price needed for the US government to break even on its investment in the insurer.
AIG intends to buy up to $3 billion of the offering.
The government has already sold three tranches in AIG above the break even price, putting Treasury on track to make a profit when it exits the insurer. Treasury has said it will not sell below the break even level.
The sale of 163.9 million shares of AIG stock will reduce the government’s holding in the insurer to 55 per cent from 61 per cent. The offering is expected to close next week.
The insurer received multiple bailouts under both the Obama and Bush administrations, with the government pledging as much as $182 billion in aid. After the latest sale, the Treasury’s investment in AIG will be about $25 billion.
The Obama administration has been unwinding its position in the politically unpopular financial crisis bailout programs. More than 300 small banks have yet to repay taxpayers. The administration could sell its remaining stake in AIG this year but has been adamant in saying it will not act for political reasons. The Treasury hired over a dozen financial institutions to help coordinate and run the offering, including Citigroup Inc, Deutsche Bank Securities, Goldman Sachs, JPMorgan Securities, Morgan Stanley and Credit Suisse.
The company is still not overseen by a single regulator and is expected to be slapped with a “systemically important” label from the powerful new US council of regulators. The label would then subject AIG to new rules as well as supervision from the Federal Reserve.
The US has raised more than $22 billion in AIG share sales, reducing the government’s outstanding investment to about $25 billion. The US holding (AIG) was cut from 92 per cent in the prior three sales, the first of which was in May of 2011. Book value (AIG), a measure of assets minus liabilities, climbed to $60.58 a share as of June 30 from $57.68 on March 31, the company said on
August 2 when it posted its third-straight quarterly profit (AIG).
Agencies
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