The U.S. Department of the Treasury today said it would sell 163,934,426 shares of its American International Group (AIG) common stock at $30.50 per share in a public offering. The total proceeds to Treasury from the AIG stock sale are projected at about $5.0 billion.
During the financial crisis, overall support for AIG through Treasury and the Federal Reserve Bank of New York totaled approximately $182 billion. There now remains a $39 billion investment that consists of Treasury’s investment ($30.7 billion) where it holds 1.084 billion shares of AIG common stock and still a large 63% controlling share of outstanding AIG common stock.
Then, there is the Federal Reserve Bank of New York, which is still owed $8 billion of – mostly borrowed – taxpayer money to AIG. That FRBNY loan, plus accrued interest of approximately $700 million, is collateralized by assets with a current value well in excess of the outstanding loan balance, according to Treasury.
Ideologues will never admit it, but TARP is looking like an effective government intervention in the failed capital markets, keeping the economy from collapsing. However, little has been done to make sure that it does not happen again in the view of critics.
As part of Treasury’s offering, AIG agreed to purchase 65,573,770 shares at the public offering price of $30.50 per share – representing $2.0 billion of Treasury’s expected proceeds from the sale. Treasury has granted the underwriters a 30-day over-allotment option with respect to approximately 24.6 million additional shares of AIG common stock, the sale of which is not included in the returns calculated above.
“We’re continuing to make significant progress exiting our investment in AIG,” said Assistant Secretary for Financial Stability Tim Massad. “We remain hopeful that taxpayers will ultimately recover every single dollar invested in the company, which is something few would have expected during the depths of the financial crisis.”
Today’s announcement is part of Treasury’s ongoing efforts to wind down the Troubled Asset Relief Program (TARP). More than 81% ($338 billion) of the $415 billion funds disbursed for TARP have already been recovered to date through repayments and other income – before including any expected proceeds from today’s announcement.