(The update and 2nd update to "AIG's Sale Of Alico To MetLife
Complete; Price Tag $16.2B," published at 12:37 p.m. and 3:10 p.m.
EDT, incorrectly referred to MetLife getting securities. A
corrected version of the second update follows.)
(Adds Treasury comments, details on government stake estimate
and background.)
The U.S. Treasury Department said Monday it expects to earn a
profit on its loans to and investments in American International
Group Inc. (AIG), the troubled insurer it helped bail out at the
height of the financial crisis.
Treasury's announcement follows AIG's $16.2 billion sale of its
second-largest foreign life-insurance business Alico and last
week's initial public offering of a stake in AIA Group Ltd.
(1299.HK). All together, AIG has raised $36.71 billion that will go
toward repaying U.S. government aid.
As part of the plan announced on Sept. 30 for the government to
unload its investments in AIG, the company plans to draw up to $22
billion from Treasury's Troubled Asset Relief Program and use those
funds to purchase the Federal Reserve Bank of New York's interests
in AIA and Alico. Treasury will take over those interests and the
department said Monday it doesn't expect a loss on them.
When the moves, part of a broad restructuring to AIG's balance
sheet, are complete early next year, Treasury will hold 92% of
AIG's common stock, worth about $69.5 billion as of Friday's close.
"This amount significantly exceeds Treasury's current $47.5 billion
cash investment in AIG," Treasury said Monday.
The latest government estimates run counter to criticism last
month from TARP's Special Inspector General that the department was
using questionable methodology on loss estimates and making
potentially overly optimistic assumptions about the value of its
stake in AIG. Treasury's past calculation on the value of its
holdings in AIG, for example, doesn't account for volatility in the
company's share price, the inspector general said.
AIG's financial restructuring is to be completed in the first
quarter and is intended to guide the government sale of its
holdings and its recouping of the $120 billion of aid provided to
AIG.
AIG is expecting to use the nearly $28 billion in cash proceeds
from the ALICO and AIA transactions to repay the credit facility
extended to AIG by the Federal Reserve Bank of New York as well as
payments on other interests owned by the federal government. It
added, "The MetLife securities will be sold over time, subject to
certain lock-up provisions and market conditions."
"We promised the American taxpayers we would repay them and the
initial public offering of AIA last week and the completion of the
ALICO transaction move us closer to delivering on our promise,"
said AIG President and Chief Executive Robert H. Benmosche. "These
transactions will generate sufficient cash to allow AIG to pay off
the FRBNY credit facility, marking a major milestone in our
commitment to repay the American taxpayers."
The New York Fed credit line has $19.2 billion outstanding, or
$20 billion including accrued interest and fees.
The Treasury Department also said it expects not to record any
losses on the preferred interests in the special-purpose vehicles
holding AIA and ALICO. They include AIG's remaining one-third stake
in AIA and the noncash payments for ALICO received from
MetLife--primarily the insurer's common stock-- and "significantly
exceed the amount of the preferred interest," said Treasury.
AIG's stock was recently down 27 cents at $41.74. It has gained
40% in 2010.
-By Kevin Kingsbury and Jeffrey Sparshott, Dow Jones Newswires;
212-416-2354; kevin.kingsbury@dowjones.com