NEW YORK ( TheStreet) -- Don't be fooled, the U.S. Treasury Department is still on the hook for bailed out insurer American International Group ( AIG). After Wednesday's announcement of a $6 billion sale of AIG shares and an agreement to receive $8.5 billion in additional payments, Uncle Sam still has $41.8 billion sunk into the insurance giant as a result of its 2008 bailout.
It means that even after years of asset sales and public offerings of business units, AIG is far from repaying the government. In two separate deals announced Wednesday, the Treasury is set to get an additional $14.5 billion returned from AIG on its bailout investment, which at its peak totaled $182.3 billlion, or a 92% stake. AIG will buy $3 billion worth of the company's shares at $29 in an overall $6 billion offering of shares by the Treasury. The price of the offering is pegged to at the same price as a May 2011 AIG initial public offering, where the Treasury pared its stake in the insurer to 77%. Still, the Treasury's remaining outstanding investment in AIG will total approximately $41.8 billion following the share sale, according to a press release. In addition, the Federal Reserve Bank of New York holds a $9.3 billion loan to AIG through its Maiden Lane III vehicle. That loan is collateralized by assets with a current value well in excess of the outstanding loan balance, according to the statement. After a near 30% surge in 2012, the Treasury's move signals that it waited for AIG's stock to recover to levels from its 2011 share offering before selling additional stock. In after-hours trading, AIG shares fell over 1% to $29.04, just above Wednesday's share offering price. Aside from the common stock share sale, AIG is expected to return $8.5 billion to the Treasury as a result of a series of 2011 and 2012 asset sales. AIG will be returning $5.6 billion to the government using proceeds from its recently announced sale of shares at its Asian insurance unit AIA. Another $1.6 billion in expected from proceeds on a Feb. 28 sale of securities held by the Federal Reserve in its Maiden Lane II AIG bailout vehicle. That sale is expected to net the Fed a $2.8 billion gain, on increasing values of the underlying assets. The final $1.6 billion will come from AIG's sale of its American Life Insurance to MetLife ( MET). Earlier in March, reports indicated that AIG had exited its over-decade long investment in the private equity firm The Blackstone Group ( BX) through a $500 million share sale. To wind down a conglomeration of businesses and repay bailout loans, AIG has been one of the biggest sellers of assets since the financial crisis. In March 2010, the insurance giant sold its Alico insurance unit for over $15 billion to Metlife and also announced its biggest crisis sale prospect in a $35 billion deal to unload its Asian insurance unit AIA Group to Britain's Prudential PLC. The latter deal was later quashed as a result of defections among AIA's senior ranks and price negotiations that made the takeover untenable. After the sale fail, AIG then did a public offering of $17.8 billion worth of AIA shares in a Hong Kong IPO. In May, AIG sold $8.7 billion worth of stock in its insurance unit in one of the biggest post-crisis IPO's that valued shares at $29. The share sale reduced the government's stake in the company to 77%, nevertheless even after the IPO, the government retained 1.5 billion AIG shares. In September 2011, AIG's International Lease Finance Corporation, its aircraft lease division, filed a $100 million IPO. For more on AIG, see 5 stocks insiders love right now and why AIG's recent fourth quarter profit doesn't matter for now. -- Written by Antoine Gara in New York
|AIG CEO Robert Benmosche|