Insurer American International Group, Inc. (AIG: Quote) has Thursday raised about $2 billion after it sold 591.9 billion ordinary shares of Hong Kong-listed American International Assurance Group Ltd. (AAGIY: Quote) or AIA, to certain institutional investors at HK$26.50 per share or about $3.42 per share. AIG will use the gross proceeds from the offering to accelerate payments to the U.S. Department of Treasury.
The offering is priced at a small premium of 0.8 percent over AIA's closing share price of HK$26.30 in Hong Kong on Thursday. Deutsche Bank (DB) and Goldman Sachs (GS) are jointly managing the block offering.
The previous AIA stock offering in March went at a discount of 7 percent, raising gross proceeds of about $6 billion, which helped AIG in reducing the U.S. Treasury's stake to 53 percent from 77 percent.
In early August, the U.S. Treasury had reduced its stake in AIG to about 53 percent from 61 percent through the sale of nearly $5.75 billion worth of shares at $30.50 per share.
AIG's sale of stake in its former Asian unit AIA will provide it with funds for the proposed $5 billion repurchase of shares solely from the U.S. Treasury that will reduce the U.S. government's stake in AIG to about 49 percent from 53 percent, based on its current share price of $34.20.
However, if the Treasury chooses to sell an equal number of shares in a public offering, as in the past, its stake in AIG will be further reduced to 39 percent.
AIG's board has already authorized an up to $5 billion repurchase of shares of its common stock, par value $2.50 per share, from the U.S. Treasury. However, the U.S. Treasury is yet to float an offering for the same.
AIG held a total of 32.89 percent of AIA's outstanding shares as it retained a one-third stake in AIA, Asia's third-largest insurer, after divesting two-thirds share through a $20.5 billion Hong Kong IPO in October 2010. It then divested about 14 percent of its holdings in March 2012 and the sale of the remaining 18.6 percent stake was restricted for a 180-day lock-in period until Wednesday.
AIG announced the current partial stake sale of 591.9 billion ordinary shares earlier in the day, with the sale of the remaining $5.6 billion or 13.7 percent stake restricted for another 90-day lock-in period until December 10.
AIG noted that AIA Aurora LLC, a wholly-owned subsidiary of AIG, expects to transfer all of its remaining interest in AIA to its parent AIG following the completion of the current offering.
AIG is currently continuing its process of consolidation by selling assets and spinning off some subsidiaries to repay bailout loans it received from the federal government during the 2008 financial crisis. A total aid of $182 billion was provided in three tranches following losses caused by housing-linked assets.
Long back, AIG had stated that it would sell all its businesses, except the U.S. property and casualty business, foreign general insurance, and an ownership interest in some foreign life operations, in order to raise money to repay the bail-out money.
AIG almost collapsed in September 2008 after rating downgrades forced the company to post collateral on credit default swaps, which banks bought from the insurer. AIG was subsequently bailed out by the U.S. government.
AIG closed Thursday's regular trading session at $34.22, down $0.59 or 1.69% on a volume of 38.65 million shares. The stock has traded in a range of $19.18 to $35.36 in the past 52-weeks. Meanwhile, AAGIY closed at $13.86, up $0.32 or 2.36% on the OTC markets.
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by RTT Staff Writer
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