American Insurance Group, the insurer whose collapse triggered pandemonium in financial markets across the world two years ago, is preparing to sever its ties with the US government’s purse strings.
AIG executives said today that they expected to finalise an agreement with government officials that could pave the way for the biggest stock offering in US history, worth tens of billions of dollars.
AIG will convert outstanding preferred shares acquired by the US Treasury into common stock, giving the taxpayer approximately 92% of AIG’s common shares when the transaction is complete. The government and AIG, which has an estimated market value of $96bn (£61bn), are interviewing Wall Street banks as they decide which one will land the lucrative job of selling off the insurer’s shares, a process that is being called a “re-IPO.” Among those pitching are other bailout recipients including JP Morgan and Morgan Stanley. The first share sale is planned for March and may top the $21.3bn raised by the selloff of another government bailout recipient, General Motors.
“With today’s announcement, we anticipate that we will be able to deliver on our promise to the American people to repay the extraordinary assistance they provided to AIG during the financial crisis of 2008,” Robert Benmosche, AIG president and chief executive, said in a statement.
In addition, AIG will repay the Federal Reserve Bank of New York $21bn to cover the loans the bank made during the financial crisis. AIG has sold assets to repay the loans, including its Taiwan unit, Nan Shan Life Insurance, which it sold for $2.16bn in cash on Wednesday.
The $182.3bn bailout of AIG in 2008 caused widespread anger. Staff received death threats after revelations that executives were being paid big bonuses and were attending conferences at luxury resorts. Benmosche has staunchly defended the insurer and its staff. He thanked the American people for their support. “We remain grateful for their support of AIG, and we remain convinced that the American people will realize a profit on their investment in our company,” he said.
Last October AIG announced that Benmosche had started treatment for cancer. The 66-year-old told employees last year that he expects his health will permit him to lead AIG until after the US treasury’s exit. The company is expected to give more details of Benmosche’s condition and any succession plans as it finalises the sale. AIG has said a long-term replacement will be chosen within the next two years.
Investors who have stuck by the company will be rewarded as part of the recapitalisation. Next week AIG plans to issue 75m warrants that will enable current shareholders to purchase common stock at price of $45. On Friday AIG was trading at $58.35.
Source : The Guardian
