AIG Closer to Repaying Debt to U.S.
Those wondering if AIG would actually be able to repay the debt it owes to taxpayers after receiving its TARP bailout funds in 2008 may be surprised to learn the insurer is well on its way. A new announcement made on Monday revealed the company had raised nearly $37 billion and is making steps to repay its debt in full.
Government Demanded Repayment
In September, sources associated with the U.S. Treasury announced that it was trying to recoup its money from AIG. As a result, the government was considering converting AIG’s $49.1 billion preferred state into common stock to sell in the first half of 2011. In response, AIG began to aggressively work out agreements to raise money.
After announcing the completion of the sale of its insurance subsidiary, American Life Insurance Company (ALICO), the insurer said that along with the initial public offering of AIA Group Limited (AIA) the two would raise about $36.71 billion.
Repayment on the Horizon
The company says it expects its cash proceeds from the transactions to repay the credit facility extended to it by the Federal Reserve Bank of New York (FRBNY). Also, it will make payments on other interests owned by the government.
After the credit facility is repaid in full, the U.S. Treasury will still turn the preferred shares into common AIG shares to fully settle the $180 billion debt it received from the government. Also, turning the stakes into shares could help with the $2.66 billion loss the company suffered in the second quarter.
All in all, it seems that AIG is on the right track. Not even a year ago, we were asking “What’s Happened to AIG?” and now we see the company in the media a lot, but typically only when associated with making the right choices for taxpayers and the company itself.