The residual portion of
American International Group
's (
AIG
) mortgage-backed securities in the Maiden Lane III LLC portfolio,
held by the Federal Reserve Bank of New York ("Fed"), has been
sold, according to sources. The New York Times revealed that the
buyers include
Credit Suisse Group
(
CS
),
Citigroup Inc.
(
C
), Merrill Lynch of
Bank of America Corp.
(
BAC
),
the Royal Bank of Scotland Group Plc
(
RBS
) and
Morgan Stanley
(
MS
).
Fed has divulged that the sale will result in net gains of $6.6
billion to the taxpayers of New York, taking the cumulative gain on
all the assets of AIG to $17.7 billion. AIG will receive one-third
of the sale proceeds, as per contract.
Maiden Lane III was created in 2008 to rescue the company from a
financial downturn by furnishing it with $24.3 billion in cash,
while AIG held a $5 billion equity stake in it. AIG, in July 2012,
received the full repayment of $5 billion against its equity
interest in Maiden Lane III along with contractual and additional
distributions of $1.1 billion.
The portfolio of assets, comprising collateralized debt
obligations (CDOs) to terminate the credit default swaps (CDS), was
the last of the assets that was unpaid under the loan issued by the
government. Under the financial rescue program, the Treasury
Department provided a lifeline of $68 billion to AIG along with
$144 billion from the Fed.
The asset sale frees AIG from all obligations tied to the Fed
associated with the financial bailout. The company had repaid its
entire outstanding loan, along with interest, under the Maiden Lane
III fund to the Fed in June, this year. However, the U.S. Treasury
still owns 53% of the company's outstanding shares.
The Treasury had sold about 189 million shares of AIG for $5.75
billion in August 2012, leaving it with 871.1 million shares.
However, this is a small fraction compared to the 92% stake that
the Treasury held in May 2011.
AIG currently retains a Zacks #2 Rank, which translates into a
short-term Buy rating. We maintain our long term 'Neutral'
recommendation on its shares.
AMER INTL GRP (AIG): Free Stock Analysis Report
BANK OF AMER CP (BAC): Free Stock Analysis
Report
CITIGROUP INC (C): Free Stock Analysis Report
CREDIT SUISSE (CS): Free Stock Analysis Report
MORGAN STANLEY (MS): Free Stock Analysis Report
ROYAL BK SC-ADR (RBS): Free Stock Analysis
Report
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