(AIG story updated with stock price change )
NEW YORK (TheStreet) -- AIG (AIG) said Thursday it entered an agreement with the U.S. Treasury in which the Treasury would receive about 1.655 billion common shares of AIG in exchange for $49.1 billion of preferred shares allowing AIG to repay all its debt to American taxpayers and allowing the U.S. government to wind down its stake in the giant insurer.
Shares of AIG have jumped 5.5% to $39.50 in morning trading. Earlier they were surging by 11.5% to $41.76 in pre-market trading.
Under the plan, the U.S. Treasury will own 92.1% of AIG common stock, but this won't be executed until AIG's credit facility with the Federal Reserve Bank of New York is repaid in full.
After the exchange is complete, it's expected that the U.S. Treasury will sell its stake in AIG over time on the open market.AIG currently owes the Federal Reserve Bank of New York $20 billion in senior secured debt under the FRBNY credit facility, which AIG is expected repay in full under the plan. The credit facility will be terminated in the process. AIG expects to pay back the New York fed in part via the initial public offering of its Asian life insurance business -- American International Assurance -- and the pending sale of its foreign life insurance unit American Life Insurance to MetLife (MET).
Select the service that is right for you!COMPARE ALL SERVICES
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV