U.S. Begins Next AIG Offering; Insurer May Buy $2 Billion

New York Fed Sells CDO Debt From AIG Rescue to BofA
American International Group Inc. (AIG) signage is displayed on the entrance to the building located at 72 Wall Street in New York. Photographer: JB Reed/Bloomberg

The U.S. government has begun its third offering of American International Group Inc. stock, and the bailed-out insurer has said it plans to buy as much as $2 billion in shares, the Treasury Department said today.

The U.S. is accelerating the pace of sales after AIG surged above $33 a share on April 5 for the first time in almost a year. The government needs to average at least $28.72 on its offerings to recoup funds that were used to take the equity stake. The government still has a 70 percent stake in AIG, which dropped 3.8 percent today to $32.83 in New York.

“We expect Treasury can meet its objective, of getting out in-time for a ‘victory lap’ before the elections” in November, as AIG works to sell assets to raise funds to repurchase stock from the U.S., Sanford C. Bernstein & Co. analysts led by Josh Stirling said in an April 4 note to clients.

Bank of America Corp., Citigroup Inc., Credit Suisse Group AG, Deutsche Bank AG, Goldman Sachs Group Inc., JPMorgan Chase & Co. and Morgan Stanley are the government’s banks for the latest offering, according to a statement today from the Treasury after the close of regular trading.

“The size and price to the public of the offering will be announced after pricing,” the department said.

The Treasury raised $5.8 billion in the first offering in 2011. At the same time, New York-based AIG sold 100 million shares for $2.9 billion to demonstrate access to the capital markets and satisfy a condition of its bailout. The insurer, led by Chief Executive Officer Robert Benmosche, bought half of the $6 billion in shares the department divested in March.

Bailed Out

President Barack Obama’s Treasury secretary, Timothy F. Geithner, has said the U.S. shouldn’t own companies a day longer than necessary. Obama is seeking re-election in November.

AIG was first rescued in September 2008 by the Federal Reserve after trading partners demanded payments on derivatives contracts. After revisions, the firm’s lifeline included a $60 billion Fed credit facility, a Treasury investment of as much as $69.8 billion and up to $52.5 billion to buy mortgage-linked assets owned or backed by AIG.

The U.S. has exited stakes in banks including Citigroup Inc. and retains holdings in automaker General Motors Co. and home- and auto-lender Ally Financial Inc. The Treasury’s recovery of funds under the Troubled Asset Relief Program climbed in March past 80 percent of the approximately $414 billion that was disbursed.

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