US shrinks its AIG stake with $18bn sell-off

 
Michael Bow
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SHARES in American International Group, the insurer bailed out by the US government in 2008, dipped yesterday after the US Treasury announced it was selling a $18bn (£11.2bn) stake back to the market.

The US Treasury’s public offering, announced by AIG yesterday, will cut its ownership from 53 per cent to around 20 per cent – giving it minority shareholder status for the first time.

The US government was forced to cough up $180bn to bail out the insurance group and take a 92 per cent stake during the 2008 financial crisis.

The public offering of AIG common stock is priced at $2.50 a share. AIG has announced it will purchase up to $5bn of the stock itself with the remaining $13bn allocated to other investors.

An additional $2.7bn of stock has also been released by the Treasury to the deal’s underwriters to cover over-allotment of shares.

The move to lower the Treasury’s holding below 50 per cent also means AIG will now be regulated by the Federal Reserve as a savings and loan holding company. This means minimum leverage and risk-based capital requirements will be imposed on the firm.

Shares dipped two per cent yesterday on the back of the announcement.

The US Treasury has slowly rolled back its holding in AIG since 2008 when it saved the firm through its Troubled Asset Relief Program (TARP). It originally reduced its stake to 77 per cent in May 2011 when it sold off $5.8bn, leaving it with a $41bn stake.