AIG shares rise on payback plan
The insurance company and the US Treasury have reached an agreement that will allow the insurer to repay its debt to taxpayers.
By Andrea Tse, TheStreet
American International Group (AIG) said Thursday it has entered an agreement with the U.S. Treasury whereby the Treasury will receive about 1.655 billion common shares of AIG in exchange for $49.1 billion in preferred shares, allowing AIG to repay all its debt to American taxpayers and the U.S. government to wind down its stake in the giant insurer.
Shares of AIG have jumped 2.8% to $38.49 today. The stock price surged by as much as 11.5% to $41.76 in premarket trading.
Under the plan, the U.S. Treasury will own 92.1% of AIG common stock, but that won't be executed until AIG's credit facility with the Federal Reserve Bank of New York is repaid in full.
After the exchange is complete, it's expected that the U.S. Treasury will sell its stake in AIG over time on the open market.
AIG currently owes the Federal Reserve Bank of New York $20 billion in senior secured debt under the FRBNY credit facility, which AIG is expected repay in full under the plan. The credit facility will be terminated in the process.
AIG expects to pay back the New York Fed in part via the initial public offering of its Asian life insurance business -- American International Assurance -- and the pending sale of its foreign life insurance unit American Life Insurance to MetLife (MET).
AIG said the plan will also help the U.S. government exit its interest in two special-purpose vehicles that hold American International Assurance and American Life Insurance.
The New York Fed holds preferred interests in the two special-purpose vehicles totaling about $26 billion.
AIG owed the government about $132.1 billion in aid as of the end of June. That amount includes $49.1 billion in Treasury Department loans.
Copyright © 2013 Microsoft. All rights reserved.
Quotes are real-time for NASDAQ, NYSE and AMEX. See delay times for other exchanges.
Fundamental company data and historical chart data provided by Thomson Reuters (click for restrictions). Real-time quotes provided by BATS Exchange. Real-time index quotes and delayed quotes supplied by Interactive Data Real-Time Services. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by SIX Financial Information.
[BRIEFING.COM] The major averages ended modestly lower with the S&P 500 shedding 0.3%.
The benchmark average saw an opening loss of 1.2% after Japan's Nikkei tumbled 7.3%. Japanese stocks sold off amid continued volatility in Japanese Government Bond futures as the 10-yr yield spiked almost 16 basis points to 1.002 before the Bank of Japan's JPY2 trillion liquidity injection caused yields to retrace their gains.
Adding insult to injury was news out of China where the HSBC ... More
More Market News
|There’s a problem getting this information right now. Please try again later.|
LATEST MARKET DISPATCHES
- No more Dispatches; here's where to find market news
The Market Dispatches column has been discontinued. Here's where to find the latest stock and business news on MSN Money, and the latest from market writer Charley Blaine.
- Dow falls 59 as late-day gloom kills a rally
- Stocks held back by fiscal-cliff worries
- Stocks suffer worst weekly loss in 5 months
- Dow off 121 as post-election swoon continues
- Dow slumps 313 after Obama's re-election
- Dow jumps 133 as Americans head to the polls
In the never-ending contest for sales, American carmakers are pulling ahead.