AIG nears deal to pay back emergency aid
AIG, the US insurance giant whose collapse two years ago this week led to the largest government bailout of the credit crisis, is just weeks away from unveiling a privatisation plan and a push to repay American taxpayers.
The company believes it is now close to repaying emergency loans from the US central bank, the Federal Reserve, and is turning its attention to its relationship with the US Treasury, which took an 80 per cent ownership stake in September 2008.
The favoured option would initially increase the government's stake to more than 90 per cent, because the Treasury will convert $49.1bn of preference shares into common equity that can more easily be sold on the stock market, according to reports yesterday. The Treasury would then sell the stake in chunks, probably beginning in the first half of next year.
The federal government and the Federal Reserve advanced up to $180bn in aid to AIG when it became clear that disastrous bets on mortgage derivatives had overwhelmed what had previous been a staid general and life insurance group. The company was in effect insuring hundreds of billions of dollars of complex mortgage investments for banks around the world, and the authorities calculated that the consequences of its bankruptcy would have been intolerable.
After numerous restructurings, the Fed is now showing a profit on some of the AIG assets it funded, and its other loans will be repaid with the proceeds of the disposal of subsidiaries including Alico and AIA. The latter is going ahead with a flotation after its sale to Prudential was vetoed by the UK group's shareholders. All in all, AIG still owes $102bn, according to its most recent quarterly report.
The discussions between AIG and the Treasury were first reported by The Wall Street Journal. AIG declined to comment on the details of any talks, but said: "Our objectives remain the same: to repay taxpayers and position AIG over time as a strong, independent company worthy of investor confidence."