NEW YORK ( TheStreet) -- Agricultural Bank of China's massive stock offering on Tuesday raised a lot of cash but will also make it more difficult for U.S. taxpayers to recoup one of their biggest bailouts, that of
American International Group ( AIG).
AgBank is expected to raise more than $23 billion when its offering is completed this week. That's less than the $30 billion that analysts first predicted the simultaneous IPOs in Hong Kong and Shanghai would raise. But the offering still represents something of a coup, given the tumultuous state of the global markets since mid-April. The side story to AgBank's offering is that it also gobbled up funds that dozens of other China-based lenders and financial firms are eager to obtain. Among them is
AIA , an Asian subsidiary of AIG. Essentially, AIA has really bad timing. A buyout agreement with Prudential plc fell apart in recent weeks when shareholders balked at the $35 billion price tag. A revised $30 billion offer was rejected by AIG's board, leaving the firm with little choice but to go for an IPO. But, as former Chairman and CEO Maurice "Hank" Greenberg has pointed out, getting that price in the market isn't going to be easy, either. "The Hong Kong market is going to be inundated with Chinese banks raising new capital," Greenberg said at a recent event, according to Bloomberg Business Week. "There's a limit to how much capital you can raise in Hong Kong, and no IPO, in my judgment, is going to fetch 30 or 35 billion dollars." Indeed. Unfortunately, the AIA deal was one prong of a two-part by CEO Robert Benmosche's plan to repay more than $50 billion to the Federal Reserve. The other prong -- selling another foreign unit called Alico to MetLife ( MET) for $15.5 billion -- appears to be going through without a hitch. Angelo Graci, an analyst with Chapdelaine Credit Partners, says AIG will have to pursue an IPO or divest AIA by selling minority interests to sovereign wealth funds and private equity firms. Either way, the process will be far more complicated than initially expected and there's no guarantee AIA will retain the $35 billion price tag AIG's board demanded. Additionally, Greenberg also pointed out that the Chinese government has ownership restrictions that might complicate other AIA transactions.
Benmosche would have accepted Prudential's revised bid. He
threatened to quit because of the board's intransigence, though he and Chairman Harvey Golub have mended fences once again. Given the fact that AgBank may raise just $23 billion, with undoubted support by the Chinese government, it calls into question who is leading AIG and who ought to be. Other AgBank Winners and Losers While other firms seeking private dollars in China may be turning green over AgBank's offering, there are a few other winners and losers in the agricultural lender's offering: Underwriters and those who wanted to lead the deal, but lost out. AgBank was wooed by an assortment of big-money investment banks -- not least among them JPMorgan Chase ( JPM), whose CEO Jamie Dimon flew to Hong Kong in hopes of winning a lead role. But AgBank eventually selected Goldman Sachs ( GS) and Deutsche Bank ( DB) as lead underwriters, with half a dozen other firms -- including JPMorgan -- retaining lesser underwriting roles. Still, whether lead position or not, any bank that has established relationships in China is doing well. The government isn't overeager to let foreign banks dominate, although foreign banks undoubtedly have the experience and expertise that China lacks. So, doing business in China is all about relationships and whom government officials trust. Greenberg, who recently visited China, put it this way last month , related to AIA's ability to operate there with 100% ownership by AIG: "They said 'Mr. Greenberg, that license was given to you and AIG -- it's not transferable.'" JPMorgan, Goldman, Citigroup ( C) and other foreign banks like Deutsche Bank have already retained licenses to do business in China. Bank of America ( BAC) is less established abroad . Since Bank of America has been selling equity stakes in foreign banks -- including China Construction Bank -- in order to meet requirements by U.S. regulators, its position is much more difficult. Starting from the ground up in a country that is lukewarm to foreigners entering its business space is never easy. Still, AgBank's IPO may turn out to be the largest ever, yielding hundreds of millions of dollars in fees, plus an equity stake for foreign banks involved in the offering. Additionally, Chinese banks are now much larger than foreign entities by market cap -- making up 50% of the top eight global lenders, according to Bloomberg. They're also operating in a country that's expected to grow larger at a much faster pace than any in industrialized nations. It's unsurprising that U.S. and European banks are ready, willing and able to help them along the way. -- Written by Lauren Tara LaCapra in New York.