AIG closer to being out of government hands

  @CNNMoney September 10, 2012: 12:04 PM ET
AIG Building

The U.S. Treasury is planning an $18 billion stock offering for bailed out insurer AIG.

NEW YORK (CNNMoney)

American International Group is moving a big step closer to being out of the U.S. government's hands.

The Treasury Department said Sunday it is offering $18 billion worth of AIG shares, representing more than half of its remaining $29 billion stake in the bailed-out insurer. Should there be strong demand for the offering, Treasury will sell an additional $2.7 billion of the company's stock.

AIG's (AIG, Fortune 500) plans to buy $5 billion worth of the shares.

Shares of AIG were down 1.5% in midday trading Monday on the news.

The exact number of shares sold will be determined by the final offering price, which has not been set. But if shares sell for close to current values, it will reduce Treasury's stake to about 20% of the company from 53% of the shares it owns today. The pricing of the shares and the sale is expected sometime early this week.

The announcement came just weeks after Treasury's partner in the 2008 bailout, the Federal Reserve Bank of New York, sold the last of its AIG holdings. That was a $6.6 billion sale of a portfolio called Maiden Lane III, consisting of collateralized debt obligations.

With the sale, the New York Fed was able to turn an $18 billion profit for taxpayers.

The latest sale will leave Treasury just short of break-even from its bailout of AIG. The insurer received about $67.8 billion under the Troubled Asset Relief Program, and Treasury will have received back more than $61 billion through stock and asset sales with this latest offering. That means it is likely to turn a profit on its AIG bailout once it sells its remaining stake, which is worth more than $11 billion at today's stock price.

Treasury's public offering is the latest chapter in a story that began in 2008, when the venerable insurer was crippled by the financial crisis that it helped to create through a series of risky deals and bad bets. The government swooped in and bought AIG's toxic assets.

The U.S. government initially offered AIG a lifeline of $85 billion that eventually expanded to $182 billion, including the TARP money.

Treasury makes $18 billion off AIG

The major "too-big-to-fail" banks have all repaid the money they received from TARP, either through repayments or share sales. Treasury made money on those bailouts. There were still about 400 smaller banks that between them owed TARP about $14.3 billion as of June 30, although both those figures have declined slightly since that latest reading.

Besides AIG, several companies bailed out during the financial crisis still have significant government ownership. Mortgage finance firms Fannie Mae and Freddie Mac, and bank and auto finance company Ally Financial are majority owned by Treasury. In the case of automaker General Motors (GM, Fortune 500), Treasury's stake is just less than a third.

Treasury said that it retained Citigroup (C, Fortune 500), Deutsche Bank (DB), Goldman Sachs (GS, Fortune 500) and JPMorgan Chase (JPM, Fortune 500) as joint global coordinators for the planned AIG offering. To top of page



Join the Conversation
CNNMoney Sponsors
Market indexes are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer LIBOR Warning: Neither BBA Enterprises Limited, nor the BBA LIBOR Contributor Banks, nor Reuters, can be held liable for any irregularity or inaccuracy of BBA LIBOR. Disclaimer. Morningstar: © 2014 Morningstar, Inc. All Rights Reserved. Disclaimer The Dow Jones IndexesSM are proprietary to and distributed by Dow Jones & Company, Inc. and have been licensed for use. All content of the Dow Jones IndexesSM © 2014 is proprietary to Dow Jones & Company, Inc. Chicago Mercantile Association. The market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. FactSet Research Systems Inc. 2014. All rights reserved. Most stock quote data provided by BATS.