NEW YORK CITY-AIG said in a regulatory filing Wednesdayafternoon it had agreed to retire its line of credit with theFederal Reserve Bank of New York, on which it owed about $21billion. The insurance giant, which received federal bailoutstotaling more than $175 billion in 2008, will use proceeds from thesale of subsidiary American Life Insurance Co. and an IPO on AIAGroup Ltd., to repay the line. Both are overseas operations; theALICO sale closed early last month.

|

Additionally, the recapitalization agreement signed by AIG, theNew York Fed, the Treasury Department and the trustees of the AIGCredit Facility Trust calls for a public offering of stockcurrently held by the Treasury. The sale would take place in thefirst half of 2011 and would seek to raise a minimum of $15billion. It would be the first of several such offerings.

|

The Treasury would have the right to set all terms andconditions of any AIG stock offering until its share of the stockfalls below 33%, according to AIG’s SEC filing Wednesday. Untilthat 33% threshold is reached, the federal government would also beable to order AIG to hold up to two stock offerings per year. Forits part, AIG would be able to sell up to $3 billion in new shares,and possibly an additional $4 billion if approved by theTreasury.

|

In a statement, AIG says its signing of the “definitive” recapagreement with the federal government “marks an important stepforward in our progress toward completely repaying taxpayers. Weremain committed to executing the steps and meeting all conditionsin the agreement as soon as possible.”

|

Tim Massad, the Treasury’s acting assistant secretary forfinancial stability, says in a statement that the AIG withagreement represents “a milestone in the government’s long-statedefforts to exit our investments in private companies as soon aspractical while protecting taxpayers. When all is said and done, webelieve taxpayers will recover every dollar invested in AIG andstand a good chance of making a profit.”

|

Earlier this week, the Treasury sold off its remaining shares ofCitigroup, disposing of 2.4 billion shares at $4.35 each. Thenation’s third largest bank had received a $45-billion bailout atthe height of the capital markets crisis.

Want to continue reading?
Become a Free ALM Digital Reader.

  • Unlimited access to GlobeSt and other free ALM publications
  • Access to 15 years of GlobeSt archives
  • Your choice of GlobeSt digital newsletters and over 70 others from popular sister publications
  • 1 free article* every 30 days across the ALM subscription network
  • Exclusive discounts on ALM events and publications
NOT FOR REPRINT

© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.