AIG Raises $37B Toward TARP Repayment

NEW YORK CITY-AIG said Monday it has raised nearly $37 billion toward repaying its TARP bailout under terms of its Sept. 30 agreement with the Treasury Department and the Federal Reserve Bank of New York. The funds come from AIG’s sale of subsidiary American Life Insurance Co. and the initial public offering of AIA Group Ltd. Both are overseas operations.

The announcement comes as AIG closes on its $16.2-billion sale of ALICO to MetLife, including $7.2 billion in cash and the remainder in MetLife securities. AIG says it expects to use the cash proceeds from the ALICO and AIA transactions to repay the credit facility extended to AIG by the New York Fed and to make payments on other interests owned by the government. The MetLife securities will be sold over time to provide additional funds to repay the federal government.

On the AIA IPO, gross proceeds were $17.8 billion, increased to $20.5 billion through the exercise of the over-allotment operation, AIG says. The ALICO and AIA transactions “will generate sufficient cash to allow AIG to pay off the FRBNY credit facility, marking a major milestone in our commitment to repay the American taxpayers,” president and CEO Robert Benmosche says in a statement. 

Proceeds from the transactions are being placed in an escrow fund with the New York Fed until the closing of the recapitalization plan, expected no later than the first quarter of 2011. As of Oct. 27, AIG owed approximately $20 billion in principal and interest to the New York Fed, the insurance giant said Monday.

“As we said on Sept. 30, AIG will restructure itself around its core property casualty and life and retirement services businesses, which are performing well, and will provide our company with a strong foundation to build value for all stakeholders going forward,” says Benmosche.