Repeatedly since its rescue in 2008 by the Feds from financial crisis, American International Group Inc.has made known its plan to repay the federal government. Today the insurer announced its most recent plans to repay the Federal Reserve and establish a recapitalization game plan that will cut its tether to government assistance for good
The announcement and associated filing of a Form 8-K earlier today caused a brief interruption of trading today on Wall Street.
The form 8-K announced a signing of the Master Transaction Agreement among ALICO Holdings LLC, AIA Aurora LLC, the Federal Reserve Bank of New York, the U.S. Department of the Treasury, the AIG Credit Facility Trust and AIG, that will result in a series of integrated transactions to recapitalize the company.
Regarding the filing of the Master Agreement, AIG issued the following statement: "Our filing today that we have signed the definitive recapitalization agreement with the government marks an important step forward in our progress toward completely repaying taxpayers. We remain committed to executing the steps and meeting all conditions in the agreement as soon as possible."
According to Bloomberg reports, CEO Robert Benmosche wants to rid the company of its debt to the government, which ballooned to $182.3 billion last year. He reportedly will use proceeds from the sales of two non-U.S. life insurers to close a Fed credit line. Further, said Bloomberg, Benmosche is counting on profits at AIG's global property/casualty coverage and U.S. life units to entice private investors to replace the equity capital provided by the Treasury Department.
The Treasury plans to convert its preferred stake of $49 billion in AIG into 1.66 billion shares of common stock, or 92% of the total, by March 15, according to statements issued yesterday by the department and the insurer. The securities are expected to be sold to private investors.
Analysts say that the U.S. government has established a strong track record for stock in bailed-out companies since the financial crisis began, which will allow it to be aggressive in gearing down its rescue of companies like Citigroup and General Motors.
Treasury expects underwriters to be selected by early next year for an offering of some of its stake and will determine how many shares to sell based on market conditions, according to a person familiar with the plan.
AIG has seen certain highs and lows since its acceptance of Troubled Asset Relief Program (TARP) funds in 2008. The company has advanced about 54% this year after falling 4.5% in 2009 and plunging 97% in 2008, according to reports.