AIG freed for share sale after Fed payback

THE recapitalisation of bailed-out insurer American International Group has closed, clearing the way for the US government to sell its 92 per cent stake.

AIG has repaid the Federal Reserve Bank of New York $47bn (£30bn), the US Treasury said, which includes the outstanding balance on the $85bn loan granted to the company in 2008.

Bankers were buzzing on Friday about how soon a share sale might happen, with at least one saying he would not be surprised if the government picked the deal's managers next week.

The recapitalisation was intended to simplify AIG's $182bn bailout by paying off the Federal Reserve and leaving the US Treasury as AIG's majority owner.

The Treasury now holds a cash investment in AIG of $68bn.

"Treasury remains optimistic that taxpayers will get back every dollar of their investment in AIG," Treasury Secretary Timothy Geithner said in a statement.

The government stands to make a profit in the tens of billions of dollars on its AIG shares, given their appreciation over the last year.

The Treasury spent all day Thursday meeting bankers in New York to find the right group to manage the stock sales.

The CEOs of some of the world's largest financial institutions appeared in person to make their case for what could be one of the ten largest share offers ever.

Sources have said the banks' proposals would includes fees of no more than 75 basis points – about $150m for the winning banks on a $20bn deal, but half the typical fee for a deal of this type and size.

Some bankers said on Friday they would not be surprised, given the competitive nature of the deal, if the fees went even lower – although one banker pointedly noted he had no interest in doing the deal for free.