AIG rallies on hopes of recapitalisation deal

City A.M. Reporter

ed-out US insurer American International Group is likely to complete its recapitalisation next week, sources have said, pushing its shares to fresh highs on hopes it is approaching a deal.

AIG has said its board has approved the issue of warrants to buy 75 million shares of common stock, conditional on all the parties to the recapitalisation agreeing it can close by 14 January.

While that does not in itself guarantee the deal will close next week, it was one of the last key steps to finish the transaction.

AIG said it will issue a statement on 12 January disclosing whether all the parties have agreed the deal can close by 14 January.

Sources believe the AIG board’s approval of the warrant issue showed the highest degree of confidence that the deal will close next week.

Under the terms of the deal, the Federal Reserve Bank of New York will be repaid in full and the US Treasury Department will be left with a 92.1 per cent stake in AIG.

The government has been contemplating two stock offerings this year to sell most of that stake, with the rest likely to be sold in 2012.

Reuters sources said AIG is targeting this March for the first share sale, but due to the complexity of the situation a sale in May was more likely.

Linus Wilson, a professor of finance at the University of Louisiana at Lafayette, estimated on Friday the taxpayers’ paper profit on the AIG deal could come to $35.6bn (£23bn) if the warrants trade at the price he expects.

AIG shares rose 1.9 per cent to $61.58 in early trade, off earlier highs of $62.86.