The U.S. Treasury Department on Friday sold $5 billion worth of shares in bailed-out insurance giant American Int’l Group (AIG), moving the government closer to owning just half of the insurer’s common stock. Before the sale, Treasury’s fourth so far and one that involves nearly 164 million shares of the company, Treasury held 61% of AIG shares outstanding. With the latest sale, the government will own about 55% of the insurer’s stock, bringing down the amount it needs to recoup from the AIG bailout to $25 billion.
The Treasury pledged more then $182 billion to AIG in September 2008, shortly after Lehman filed for bankruptcy protection, in exchange for a 92% taxpayer stake in the company. The govt’s remaining investment would represent an 86% reduction from the U.S. Treasury’s original $182.3 billion AIG commitment.
The Treasury said the shares were sold at $30.50 apiece, $1.77 above the government’s purchase price-per-share of $28.73, meaning taxpayers will earn a profit on the sale.
Treasury also said that AIG has indicated it will purchase up to $3 billion of the stock at the offering price.
“AIG has indicated that it intends to purchase up to $3 billion of the common stock sold by Treasury in this offering at the initial public offering price,” the Treasury Department said in the announcement.
AIG said that BofA Merrill Lynch (BAC) Citigroup (C), Deutsche Bank (DB), Goldman Sachs (GS), and JPMorgan (JPM) are the banks retained as joint bookrunners for the offering. Underwriters have a 30-day option to buy as much as $750 million more in AIG stock, the department said.
AIG shares closed on Friday at $31.34 in New York trading, up from Thursday’s close of $30.84. The shares have gained 35% so far this year, but are currently trading at nearly 50% discount to the company’s current book value (assets minus liabilities), which increased 5% during the 2Q of 2012 to $60.58 a share from $57.68 a share on March 31.