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Treasury Unloads AIG Stake, But At A Discount

 May 08, 2012 02:52 PM
 


(By Mani) Treasury continued to offload its stake in American International Group (NYSE:AIG) and raised $5.8 billion on May 7 after selling 188.5 million shares at $30.50 apiece, a discount of 7 percent from May 4 closing price of AIG stock of $32.83. The selling price was, however, higher than the Treasury's breakeven price of $28.72.

The latest share sale is expected to cut Treasury's remaining investment in AIG to $30 billion and reduce its ownership in AIG to 61 percent. Treasury fetched $11.8 billion after selling AIG shares at $29 in May 2011 and March 2012.

[Related -American International Group Inc (AIG): Current Weakness Offers A Buying Opportunity]

Meanwhile, the U.S. government could make a profit of more than $15.1 billion from its $182 billion bailout of AIG, according to a report from Government Accountability Office (GAO).

AIG still needs to repay $38 billion, including Treasury's share of $30 billion and a balance of $8 billion owed by Maiden Lane III to the Federal Reserve Bank of New York (FRBNY).

The report said Treasury could recoup the total value of assistance extended to AIG and take in an additional $2.7 billion including dividends, based on the $30.83 closing share price of AIG common stock on March 30, 2012. The remaining assistance through Maiden Lane III will likely be repaid in full and net additional returns to the government.

[Related -American International Group Inc (AIG): Buy This 'Hated' Company While It's Still An Incredible Bargain]

In 2008, the U.S. government bailed out AIG by investing $182.3 billion in the insurer at the peak of financial crisis via Troubled Asset Relief Program (TARP). TARP is a program of the United States government to bailout key corporations that are considered too big to fail. Under this program, the government instilled funds in companies and purchase assets and equity to strengthen their balance sheets in the subprime mortgage crisis.More than 81 percent ($338 billion) of the $415 billion funds disbursed for TARP have already been recovered to date through repayments and other income, according to the data from Treasury.

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