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US Treasury to sell of $6B in AIG shares

/ 10:48 AM March 08, 2012

WASHINGTON – The US Treasury said Wednesday it would seek to raise $6 billion by selling off a chunk of its holdings in American International Group, the giant insurer it rescued at the height of the financial crisis.

The Treasury gave no details of number of shares on offer and the pricing, but said that AIG itself was planning to take up to $3 billion of the offering.

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That would likely reduce by a significant amount the Treasury’s 77 percent holding of AIG, nearly 1.46 billion shares.

At the closing price Wednesday of $29.45, that would put the offer at about 11 percent of the company, though Treasury would likely be pricing the offer at lower than market to ensure buyers for such a large offering.

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AIG shares have traded between $23.54 and $30.39 so far this year.

Underwriters would also have the option to buy another $900 million worth of shares in the offering, according to a separate AIG statement.

Meanwhile Treasury said that AIG would repay $8.5 billion for money the government put into AIG entities to support the company in the 2008 rescue.

AIG will pay for this in part from proceeds of its $6 billion sale of shares in Hong Kong-listed affiliate AIA Group Ltd. on Monday.

“The people of AIG have achieved another significant milestone in our progress toward our goal that American taxpayers recoup their entire investment in AIG at a profit,” AIG chief executive Robert Benmosche in a statement.

The Treasury and the Federal Reserve stepped in to rescue AIG, formerly the world’s largest insurance group, committing $180 billion in support in 2008 as the company appeared on the verge of a catastrophic failure amid the meltdown of the market for packaged mortgage securities.

The Treasury put in some $70 billion to support the company. Since then — before Wednesday’s deals are counted — paybacks and share sales had brought the outstanding exposure of the Treasury to just over $50 billion.

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The official Government Accounting Office said in January that Treasury was not likely to ever recover all of its investment in the company.

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TAGS: AIG, Finance, Insurance, US Treasury, World Financial Crisis
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