Sales of mortgage-related assets held in the Maiden Lane III portfolio enabled the repayment of New York-based AIG’s stake and interest, the district bank said in a statement on its website today. AIG will get one-third of the profit from further asset sales, with the New York Fed getting the rest.
The Fed’s $24.3 billion loan to Maiden Lane III was repaid last month, and AIG was scheduled receive the next $5.6 billion in proceeds, which includes interest, Jay Wintrob, the chief executive officer of AIG’s life-insurance unit, said June 13. AIG may use the cash to buy back shares, which would cut the Treasury Department’s 61 percent stake, Jimmy Bhullar, an analyst at JPMorgan Chase & Co., wrote in a July 10 note.
“We expect ongoing capital deployment to drive steady ROE improvement,” Bhullar wrote, using the abbreviation for return on equity.
The Fed created Maiden Lane III to purchase $62.1 billion in collateralized-debt obligations and keep AIG from collapsing, sparing Wall Street firms losses. Maiden Lane III was used to cancel credit-default swaps when AIG couldn’t meet collateral calls on the contracts from banks including Goldman Sachs Group Inc. (GS) and Societe Generale SA.
Maiden Lane II, another rescue vehicle, closed in February with a $2.8 billion profit for the Fed and $1.6 billion of proceeds for AIG, which it used to repay federal aid. Treasury has cut its stake in AIG from 92 percent by selling shares.
AIG shares dropped 0.5 percent to $31.28 at 4:01 p.m. in New York. The stock has gained 35 percent this year.
The insurer’s bailout swelled to $182.3 billion including a $60 billion Fed credit line, as much as $52.5 billion for the two Maiden Lane vehicles and a Treasury investment of up to $69.8 billion. The remaining investment was $30 billion as of June 14.
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