US Treasury sells AIG shares

City A.M. Reporter
The Treasury is barely breaking even on its investment in beleaguered insurance giant American International Group, according to an early litmus test of market interest in the firm's stock.

The Treasury sold 200m shares of AIG at $29 per share, a slight discount from their closing price and not far above the $28.73 average price the Treasury will need to recoup its full investment in the company.

The $8.7bn (£5.3bn) total sale, which included 100m shares sold by AIG itself, was also far smaller than the $10bn to $20bn banking sources had been throwing around, and hinted at a persistent lack of investor interest in the firm despite its apparent strides.

Treasury acquired the shares under extreme duress, as the potential failure of the insurance giant threatened to exacerbate an already severe financial crisis in late 2008.

Tuesday's sale represented the first step in removing generous support for the insurance behemoth, which totalled over $180 billion in several instalments.

Treasury will remain by far the majority shareholder of AIG, but its holdings now comprise 77 percent of the total, down from 92 percent before the sale.

"We're hopeful that we can recover all the investment that we made," Tim Massad, the Treasury's acting secretary for financial stability said during a conference call with reporters.

But he added that the extent of losses - or profits - would not be known until Treasury fully exits its stake.

Massad said there is no specific timetable for the sale of remaining shares. He added that, following an agreed "lock-up" period of 120 days, the Treasury would continue to reduce its holdings "in an orderly fashion."

"We're going to sell in a way to maximize value to the taxpayer," Massad said.

Treasury raised $5.8bn on Tuesday. All told, it needs to raise $47.5bn to break even on the equity portion of its investment in AIG.