AIG Raises $3.7 Billion in Cash From Sales of AerCap Stock

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American International Group Inc., the largest commercial insurer in the U.S. and Canada, raised $3.7 billion in cash by selling AerCap Holdings NV stock in a larger-than-planned transaction.

AIG sold about 71.2 million shares in a public offering, the company said Wednesday in a statement. AerCap, an aircraft-leasing company, purchased an additional 15.7 million of its shares from AIG. The New York-based insurer’s stake in AerCap falls to about 5 percent from 46 percent with the sales, after AIG said earlier that it expected to sell 50 million shares in the public offering.

AIG Chief Executive Officer Peter Hancock announced a $3.5 billion share-repurchase plan in April. The insurer is focused on global property-casualty coverage and U.S. life and retirement products after selling more than $75 billion in assets to help repay a government bailout.

“It’s an important milestone on them building capital, shedding these non-core assets and returning capital to shareholders,” Paul Newsome, an analyst with Sandler O’Neill & Partners, said in an interview before Wednesday’s announcement. “I think most of it will end up funding stock repurchases.”

The offering raised about $3.49 billion, with AerCap stock priced at $49, compared with Wednesday’s closing price of $50.34, according to a separate statement from the lessor. AerCap paid $47.77 per share, for a total of about $750 million. That includes $250 million in cash and $500 million of 6.5 percent fixed-to-floating rate, junior subordinated notes.

Underwriters’ Option

Total proceeds for AIG were $4.2 billion, including the notes. AIG will book a loss of about $400 million on the sale of the shares, the company said in a regulatory filing.

AerCap shares changed hands for $48.90 at 9:43 a.m. in New York trading Thursday. AIG slipped 0.7 percent to $60.66.

Citigroup Inc. and Goldman Sachs Group Inc. led the offering. Underwriters have the option to purchase 10.7 million additional shares from AIG, which said it will hold no remaining stake if the option is fully exercised.

The insurer acquired the holding as part of its sale last year of International Lease Finance Corp. to AerCap for about $7.6 billion in cash and stock. It was required to hold all the stock for at least nine months.

“AIG has built a long track record of successfully and responsibly monetizing our non-core assets,” Hancock said in the statement. “We are pleased that, since the time of announcement of the sale of ILFC to AerCap, the value of the transaction has increased by more than $2.2 billion.”