AIG to Redeem $1.1 Billion Debt - Analyst Blog
March 08 2013 - 1:25PM
Zacks
American International Group, Inc. (AIG) has
announced the redemption of its entire outstanding balance of 7.7%
Series A-5 junior subordinated debentures due 2047. The company has
set Mar 18 as the redemption date, on which it will repay the
principal amount along with any accrued and unpaid interest to
debenture holders of record as of Mar 15.
AIG has outstanding 7.7% junior subordinated debentures worth
$1.1 billion as of Mar 7, 2013. They are held in book-entry form
through the Depositary Trust Corporation, which will redeem them
according to its procedure. The debenture holders will receive the
payment once the process is over and need not take any action to
receive it as all the debentures are being redeemed.
The transaction is aimed at achieving AIG’s capital management
targets. The redemption is expected to reduce the high-interest
rate debt, thereby improving the interest coverage ratio. Reducing
its interest expense by debt repayment is a priority for the
company at present.
Thereafter, AIG might reinstate its dividend policy, which was
suspended in 2008 due to the financial crisis faces by the company.
However, the reinstatement depends on a Federal Review of its
capital position. The company also intends to start repurchasing
shares once its financial position becomes strong enough.
AIG is steadily trying to enhance its financial flexibility.
Last month, the company announced its intention to repurchase bonds
worth $1.25 billion from the open market, through a tender offer.
AIG plans to redeem some of its junior subordinated debentures
worth about $650 million and another set of bonds with principal
amount totaling $275 million. One more set of sterling and Euros
denominated debentures, valued at about $325 million, are also set
for buyback.
AIG carries a Zacks Rank #3 (Hold). Other multi-line insurance
companies worth considering are AEGON N.V. (AEG),
Ageas SA/NV (AGESY) and CNO Financial
Group Inc. (CNO). All these companies carry a Zacks Rank
#1 (Strong Buy).
AEGON N V (AEG): Free Stock Analysis Report
AGEAS-ADR (AGESY): Get Free Report
AMER INTL GRP (AIG): Free Stock Analysis Report
CNO FINL GRP (CNO): Free Stock Analysis Report
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