Our Terms of Service and Privacy Policy have changed.

By continuing to use this site, you are agreeing to the new Privacy Policy and Terms of Service.

AIG payback plan back to square one

By David Goldman, staff writer

NEW YORK (CNNMoney.com) -- AIG and Prudential PLC formally terminated a deal for an Asian life insurance unit on Thursday that would have accelerated AIG's bailout repayment to the U.S. government.

The announcement comes two days after AIG rejected Prudential's reduced bid for AIA, AIG's Hong Kong-based life insurance division. In early March, the companies had agreed upon a $35.5 billion price tag for AIA. But it became apparent over the past few weeks that Prudential's shareholders were not going to accept the deal.

Prudential attempted to renegotiate the terms of the deal with AIG, offering $30.375 billion instead. Prudential PLC is not related to the American insurer Prudential Financial Inc.

AIG has said that it considers the sale of AIA to be a crucial component of its effort to repay the more than $130 billion it has borrowed from U.S. taxpayers. The troubled insurer had planned on using the proceeds of the sale to pay down $25 billion of its debt to the Federal Reserve.

When the deal was first announced on March 1, AIG's Chief Executive Robert Benmosche said the deal would allow AIG "to realize value on a faster track to repay U.S. taxpayers" and will give the company "greater flexibility" with its restructuring plans.

Now that the deal has fallen through, AIG may consider an initial public offering for AIA, an option that the company had initially proposed last year. An IPO would take much longer to complete than a direct sale, and the recent market turmoil may dictate a lower price for the unit.

According a regulatory filing, AIG will receive a termination fee from Prudential worth £152.6 million ($223.9 million) on July 1.

Shares of AIG (AIG, Fortune 500) rose more than 1% in premarket trading Thursday. To top of page

Search for Jobs

Index Last Change % Change
Dow 18,169.68 -29.65 -0.16%
Nasdaq 5,215.97 -34.30 -0.65%
S&P 500 2,133.04 -6.39 -0.30%
Treasuries 1.84 0.05 2.96%
Data as of 5:02pm ET
Company Price Change % Change
Bank of America Corp... 16.91 0.04 0.24%
Ford Motor Co 11.74 -0.14 -1.18%
Chesapeake Energy Co... 6.08 0.08 1.33%
AT&T Inc 36.52 0.09 0.25%
CenturyLink Inc 31.00 2.75 9.73%
Data as of 4:07pm ET


Shares of LA Times owner Tronc plunged 28% on Thursday due to concerns that banks are backing out of financing the company's potential takeover by Gannett. More

Nearly a third of workers in the gig economy, or independent workforce, do it out of necessity because they can't find better work or pay, a new study shows. More