AIG finalizes plans to cut US stake
The Treasury Department will convert the $49 billion it holds in preferred shares to common shares.
By Joseph Woelfel, TheStreet
American International Group (AIG) is finalizing a plan to accelerate the process of paying back taxpayers and reducing the government's majority ownership in the insurance company, The Wall Street Journal reports, citing people familiar with the matter.
Under the plan, the Treasury Department would convert $49 billion of the AIG preferred shares it holds to common shares that can be distributed or sold to private investors over time, sources told the newspaper.
The conversion, which could take place at about $35 per AIG share, is likely to occur in the first half of 2011 and is expected to happen after AIG pays back its secured debt to the New York Federal Reserve, the Journal reports. The government's ownership in AIG would likely rise to more than 90% before it is reduced gradually.
AIG shares closed Tuesday at $37.32.
The exact price at which the Treasury converts its preferred shares to common shares would determine how much of AIG the government would own as a result, the Journal reports.
The plan needs approval from the board of AIG, Treasury, Federal Reserve and three trustees who oversee the government's current 79.8% ownership interest in AIG, the Journal notes.
The groups are trying to come to an agreement on the terms of the plan as soon as Wednesday, when AIG's board is scheduled to meet in New York with Treasury and New York Federal Reserve officials, the Journal reports.
AIG's outstanding balance of assistance from the U.S. government totaled $132.1 billion as of June 30, according to The Associated Press.
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