Exit plan gives US Treasury greater risk and potential reward
The US Treasury will exchange its $49.1bn in AIG preferred shares into a 92.1% stake – bigger than predicted - in AIG to be sold next year.
The Treasury effectively takes a bigger risk but can make more money from the deal providing shares stay above about $30. AIG shareholders will receive warrants to buy more shares to reduce the dilution caused by the Treasury’s conversion.
The Federal Reserve Bank of New York (FRBNY), which has lent AIG $20bn and is entitled to $26bn from the sale of the insurer’s assets, will be repaid by the end of March 2011. Interests in two special purpose vehicles that control AIA and ALICO will be transferred, leaving the Treasury as the company’s sole government investor.
Robert Benmosche, AIG’s chief executive, said: “This is a pivotal milestone as we deliver on our long-standing promise to repay taxpayers, and we thank the American people for their support. With this plan, we remain on track to emerge with one of the largest, most diversified property and casualty companies in the world.
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