Business

AIG to raise $6B in Asian insurer’s stock to repay US government

HONG KONG — American International Group (AIG) kicked off a $6 billion sale of shares in Asian life insurer AIA Group on Monday in Hong Kong, moving forward with plans to repay another chunk of its 2008 US bailout.

AIG said the shares will be placed with institutional investors and expects them to be priced by Tuesday. The 1.7 billion shares up for sale represent around 14 percent of AIA, less than half the 32.9 percent stake AIG holds, according to a term sheet.

Proceeds from this week’s sale have been earmarked to repay the US government, which rescued AIG from near collapse during the financial crisis with a record $182.3 billion bailout that has been partially repaid. The Treasury Department still has to recoup about $50 billion in taxpayer funds, and about $8.4 billion of that amount will be repaid when AIG sells the AIA shares and other assets, including its airplane-leasing subsidiary.

The rest of the money — roughly $42 billion — is supposed to come from the government’s sale of its 77 percent stake in AIG.

New York-based AIG used to own all of AIA and sold two-thirds of the company in a Hong Kong initial public offering (IPO) in late 2010. A one-year lockup on further sales expired at the end of October last year, and AIG had been waiting for favorable market conditions to sell more of AIA.

Goldman Sachs, Deutsche Bank and Citigroup are managing the sale for AIG.

AIA shares have gained 48 percent since their IPO and are up 20 percent this year. The term sheet circulated Monday in Hong Kong said AIG plans to sell the shares at HK$27.15 (US$3.50) to HK$27.50 each, about a 5.8 percent to seven percent discount to AIA’s closing price last Friday, but higher than the Asian insurer’s HK$19.68 IPO price back in October 2010.

AIG will be restricted from selling more shares for an additional six months once the sale is complete.

AIG CEO Robert Benmosche said in an earlier interview that one of the insurer’s priorities this year is moving forward with asset sales to repay taxpayers and taking other steps to boost AIG’s value in the eyes of investors.

The AIA share sale will also remove some volatility from AIG’s quarterly results, which have seen large swings over the past year due to changes in the market value of its one-third stake in AIA.

Shares of AIA were suspended from trading Monday pending an announcement about AIG’s share placement, the insurance company said. It did not give any details on pricing or the size of the sale, however.

AIG’s total stake in AIA is valued at US$14.9 billion based on Friday’s closing price. After the placement, AIG, which currently holds 32.89 percent of AIA, will hold around an 18.9 percent stake valued at US$8.5 billion.