American International Group Inc. (AIG) paid the U.S. Treasury Department $1.5 billion to retire obligations related to its 2008 taxpayer bailout and simplify the government’s ties to the insurer.
AIG, which sold more than $50 billion in assets after its 2008 rescue, has now repaid the Treasury’s preferred-equity investment, the department said today in a statement. That leaves the government with a 70 percent stake in the insurer’s common stock. The Federal Reserve Bank of New York is still owed about $9 billion from buying mortgage-linked assets.
“It’s going to reduce the complexity of the balance sheet, both with the relationship with the government as well as reduce the complexity of the company in general,” Paul Newsome, an analyst at Sandler O’Neill & Partners LP, said in a phone interview before today’s announcement. “That’s important if you’re an investor and it’s important if you’re a taxpayer.”
The payment eliminated Treasury’s preferred shares in a facility created in December 2009 to reduce AIG’s debt to the Federal Reserve. Chief Executive Officer Robert Benmosche, 67, is seeking to replace government funds by attracting private investors as a rebounding economy and climbing stock markets help companies unwind their bailouts.
Investors rewarded the New York-based firm with its lowest borrowing costs in more than four years when it issued $2 billion in debt this week.
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