AIG, Treasury plan big stock sale: sources

The Treasury could cut its stake in bailed-out insurer American International Group Inc (AIG.N) by a fifth through a large stock offering in the first half of 2011, sources familiar with the matter said.

AIG and the Treasury would both sell stock in the offering, which could total more than $10 billion, according to the sources. That would place it among the largest U.S. stock offerings in history. The sources are anonymous because these discussions are not public.

The government has seen strong market appetite for stock in bailed-out companies in the past few months, allowing it to be more aggressive in winding down its unpopular rescue of financial firms and other businesses. Earlier this week, the Treasury sold its remaining shares in Citigroup Inc. (C.N) for $4.35 each, marking an exit from ownership in the bailed-out banking giant with a $12 billion gross profit for taxpayers.

General Motors Co’s (GM.N) initial public offering last month became the world’s biggest, raising $23.1 billion. “It doesn’t strike me as all that aggressive given what we’ve seen in the recent sales of GM and Citi”, Aite Group analyst Clark Troy said. “Given those two precedents, as well as the market’s willingness to digest the AIG debt, I don’t see 20 percent in the first half of 2011 being particularly aggressive at all”.

An offering of AIG stock could come as early as March, but the discussions are preliminary, and the exact size and timing have not been decided, the sources said. The offering would come after a recapitalization plan, which simplifies the bailout structure and accelerates the payback schedule, closes by the end of first quarter. After that deal closes, the Treasury will own 92.1 percent of AIG, which received a $182.3 billion taxpayer-funded aid package during the crisis.

AIG executives had previously indicated they were looking to raise at least $3.5 billion in capital with a debt sale this year and a stock offering early next year. The company sold $2 billion in debt last week and was thought to still be looking for at least $1.5 billion from a share offering.

“We hope to be able to go to the market with a public offering of AIG this spring, but we have work to do to make that happen”, AIG spokesman Mark Herr said. “We are working as diligently as we can to achieve this as quickly as possible, subject to market conditions.

“We remain committed to executing the steps and meeting all conditions in the recapitalization agreement as soon as possible”, he said.

A Treasury spokesman said the agency was focused on finishing the restructuring deal. “We are making good progress on the recapitalization plan but it is premature to speculate about next steps”, he said.

AIG’s shares have rallied this year, gaining 45 percent as the insurer under Chief Executive Robert Benmosche has charted a way out of government support by stabilizing core operations, tapping the debt markets and disposing of some assets.

AIG’s shares were off 3.8 percent to $42.26 in afternoon trading on the New York Stock Exchange. But the shares are trading well above the $30 level, the approximate mark that the Treasury would need to make a profit on the bailout. Analysts said the share decline was a reaction to the potential sharp increase in shares on the market.

“This is pretty dilutive action, sure, so there may be some concern on that score”, Aite Group’s Troy said. AIG and the U.S. government announced a plan on September 30 to accelerate the payback of bailout money. That plan allows the Federal Reserve Bank of New York to be repaid in full and ends its involvement in AIG, leaving the insurer to deal with just the Treasury Department, while simplifying the bailout structure.

The Fed’s involvement has been difficult for AIG because it has been senior to other creditors, while Treasury’s equity stake has put it at the opposite end of the spectrum, creating the potential for competing interests.

The Treasury will receive about 1.66 billion AIG common shares, raising its stake in the insurer to 92.1 percent from nearly 80 percent, under the recapitalization plan. The share offering now under discussion could see that stake cut to the low-70 percent range in one go. (Reuters)

Exercise 6. Make a summary of the news issue below and translate it into Ukrainian.

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