AIG's Largest Private Investor Raises Stake

AIG's largest private shareholder has increased its stake to 30%.
By Lauren LaCapra ,

NEW YORK (

TheStreet

) -- Fairholme Capital purchased nearly two mllion additional shares of

American International Group

(AIG) - Get Report

stock over the past several weeks.

In a

Securities and Exchange

filing on Thursday, the high-profile investment firm, which is run by

Bruce Berkowitz

, said it holds 41.9 million common shares of AIG, for total of 30%. Between Nov. 17 and Dec. 6 Fairholme, and the funds it managed, acquired 1.9 million shares in a price range of $41.03 to $43.56 and sold 58,400 shares for $40.80 apiece.

Before those transactions, Fairholme, which is AIG's largest private shareholder, had disclosed a 26.6% stake in AIG.

The company also swapped nearly 30 million shares of convertible preferred stock into 2.9 million shares of common stock on Nov. 24. Fairholme received one-tenth of a share of common stock plus $3.27 in cash for each preferred share it exchanged. Fairholme and its managed accounts also sold 2,146 preferred shares in a price range of $7.26 to $7.30.

The deal was part of AIG's broader exchange plan ahead of a recapitalization plan with the federal government. The company had offered to exchange up to 74.5 million preferred shares. About 49 million of those shares were tendered, 61% of which belonged to Fairholme.

In recent trading, AIG's common stock was up more than 2% at $43.10. The stock had been halted late Wednesday afternoon as the company announced a detailed plan to repay $70 billion in taxpayer funds. The new plan included a revision that could potentially dilute private shareholders more.

As earlier outlined, AIG plans to repay the

Federal Reserve

$20 billion it borrowed using $27 billion in proceeds from two divestitures. It will also draw down the remaining funds on a $23 billion credit line from the U.S. Treasury Department in exchange for 1.65 billion common shares. The company will retain $2 billion worth of the funds for general corporate purposes.

AIG will take a $4.5 billion charge to earnings related to the repayments once those deals close.

The Treasury is expected to begin reducing its 92% stake in March by offering as much as $10 billion worth of common stock to the market. In an important amendment, the Treasury will also allow AIG to raise another $3 billion in new common equity, depending on how well the market receives its offerings.

AIG shares had declined about 4% on Wednesday afternoon before the New York Stock Exchange halted trading. Investors appeared concerned about possible dilution from additional equity raising but by Thursday morning, those worries seem to have evaporated.

http://www.thestreet.com/story/10889111/berkowitz-dives-deeper-into-aig-stock.html">

>>>Read More: Berkowitz Dives Deeper Into AIG Stock

http://www.thestreet.com/story/10897396/1/aig-becomes-a-value-play.html">

>>>Read More: AIG Becomes a Value Play

http://www.thestreet.com/story/10890681/banks-selling-off-on-yesterdays-news-berkowitz.html">

>>>Read More: Berkowitz Q&A

http://www.thestreet.com/story/10931363/aig-completes-exchange-offer.html">

>>>Read More: AIG Completes Exchange Offer

-- Written by Lauren Tara LaCapra in New York

.

>To contact the writer of this article, click here:

Lauren Tara LaCapra

.

>To follow the writer on Twitter, go to

http://twitter.com/laurenlacapra

.

>To submit a news tip, send an email to:

tips@thestreet.com

.

Disclosure: TheStreet's editorial policy prohibits staff editors, reporters and analysts from holding positions in any individual stocks.

Loading ...