AIG, US treasury to sell $9 billion in stock

NEW YORK: American International Group and the US Treasury said they will sell around $9 billion in AIG stock, but sources familiar with the situation said the Treasury would pull the sale if it cannot be done profitably.

AIG shares have fallen by more than a third this year, bringing the stock close to the government's $28.72-a-share break-even point. There has been speculation in recent days that the offering would have to be priced well below that in order to get done.
But the sources, speaking on condition of anonymity, said the Treasury was committed to making a profit on this and future offerings and would pull the deal off the table if it could not do so. That makes the roadshow that began on Wednesday even more crucial, as the company will have to not only sell investors on the stock but also convince them the shares are worth buying without much, if any, discount.

AIG shares had their best day in nearly two months on Wednesday, closing up $1.03 to $30.65.

PROFITS LOST

The offering is less than half of what had been contemplated by some people earlier this year. When Wall Street banks offered their services to manage the sale in January, there was talk among banking sources of an offering of more than $20 billion.

The Treasury and AIG only agreed in the last week on the size of the offer, the sources said, suggesting some of those expectations may have been inflated.

At one point earlier this year, the Treasury was sitting on a paper profit north of $27 billion. There was talk of a blockbuster stock offering in May, a second one later in the year and perhaps a third in early 2012 to get the government out of one of its riskiest investments.

In the meantime, AIG ran into asbestos problems at its property insurer Chartis, short sellers piled into the small number of shares still publicly traded and in four months the company shed more than a third of its value.

The Treasury would have to raise just over $47.5 billion from AIG share sales to break even.

Nonetheless some shareholders are disappointed the offering is moving ahead, as one made clear at AIG's annual meeting on Wednesday.

"I think the directors have mismanaged this. You're now selling stock at one half of what it sold for a few months ago," said Kenneth Steiner, who holds 600 shares of AIG.

Still, most of the shareholders who spoke at the meeting offered praise for the board's work and for Chief Executive Robert Benmosche in particular. Benmosche, the former MetLife CEO who took over AIG in the midst of the crisis, stopped the company's fire-sale break-up, energised the staff and restructured the company. He did much of it while undergoing treatment for cancer.