Marking the first reduction
of its equity stake in American International Group (AIG), the US
Department of the Treasury has completed the sale of 200m shares in
the insurer at $29 per share to private investors.
The sale, which garnered
$5.8bn for the treasury, reduced the US government’s stake in AIG
from 92% to 77%.
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While a big step forward, the
issue price was barely ahead of the minimum of $28.73 per share the
treasury needed to break-even on its investment. Significantly more
could have been raised had the issue been undertaken earlier this
year.
AIG’s share price has slumped
from a peak of $61.18 in early-January, weighed down by poor first
quarter 2011 results which saw net income fall 85% compared with
the first quarter of 2010’s $1.78bn to $269m.
In addition to the treasury’s
share sale, AIG itself issued 100m shares, raising $2.9bn of which
$550m has been allocated to the payment of a settlement reached in
the state of Ohio in June 2010.
The remaining funds raised in
the issue are to be allocated for corporate purposes, AIG noted in
a release.
The $550m payment dates back
to June 2010 when AIG and Ohio attorney general Richard Cordray
agreed to a $725m settlement relating to a class action in which
Cordray represented three Ohio public pension funds.
Under the settlement, AIG
paid $175m initially with the $550m balance to be funded through
one or more share issues.
At the time of the
settlement, Cordray noted that the class action related to three
illegal acts that resulted in AIG’s share price falling
significantly.
The illegal acts included accounting fraud by AIG that
resulted in a $3.9bn income restatement in May 2005.
