American International Group Inc.
) is in the final leg of its government bailout loan repayment as
the US Federal Reserve (Fed) announced the sale of the remaining
15.9% ownership in the company. This also indicates a
sooner-than-expected complete liberation.
Accordingly, the leftover 234.2 million shares are priced at
$32.50 a share, for a total amount being about $7.61 billion.
However, the Fed will continue to retain the warrants in order to
buy AIG stock in the future. Moreover, it is yet to be known if
the shares will be sold in the open market or it will be
purchased by the company.
Meanwhile, BofA Merrill Lynch of
Bank of America Corp.
Deutsche Bank AG
Goldman Sachs Group Inc.
JPMorgan Chase & Co.
) have been appointed as the joint global managers for the stock
AIG has successfully shrunk the Treasury's ownership in it
from 92% in January last year to 15.9% in September 2012, when
the Fed raised $20.7 billion from the company's stock sale. The
latest share-sale will release AIG of the $182.3 billion rescue
loan taken from the US Fed in September 2008, when it was at the
peak of financial crisis.
Ever since, AIG raised about $65 billion from asset
divestitures, including the recent sale of 90% of International
Lease Finance Corporation (ILFC) to a Chinese conglomerate.
Alongside, the company raised significant funds through stock
offering, rebound of its huge derivative portfolio, business
spin-offs and restructuring, in order to repay the government
debt and focus on its core insurance operations.
Consequently, AIG has not only been able to repay the large
loan amount, but has also generated ample profits for the Fed.
Moreover, a complete liberation from the Fed will enhance AIG's
capital deployment efficiencies. The company is also expected to
initiate dividends by the third quarter of 2013.
The sooner-than-expected wipe-off of Treasury's stake helps to
retain the investors' confidence in the company. However, we
believe that AIG is liable to be confronted by fresh regulatory
challenges from the Fed upon the complete dilution of the
Thus, we remain on the periphery at the moment to analyse the
managerial and financial implication of AIG's liberation going
forward. Consequently, we maintain a long-term Neutral outlook on
AIG with Zacks Rank #3, which implies a short-term Hold rating
and indicates a slight upward pressure on the stock in the near
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