AIG closes recapitalization, repays Fed

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AIG closes recapitalization,[link widoczny dla zalogowanych], repays Fed
American International Group Inc. (AIG) announced on Friday that it had completed a recapitalization announced on Sept. 30,[link widoczny dla zalogowanych], 2010, repaid the U.S. Federal Reserve's loans and converted the Treasury Department's preferred stake into common stock,[link widoczny dla zalogowanych], paving the way for a full exit of the government in the future.AIG said that it had repaid 21 billion dollars to the Federal Reserve Bank of New York, thus having no outstanding obligations to the New York Fed as of today.
According to the announcement,[link widoczny dla zalogowanych], AIG also converted 49.1 billion dollars of outstanding preferred shares acquired by the U.S. Treasury Department into 1.655 billion shares of common stock,[link widoczny dla zalogowanych], resulting in the Treasury Department owning approximately 92 percent of AIG's common shares. AIG expected that over time the Treasury Department would sell its stake in AIG subject to market conditions."Treasury welcomes the culmination of AIG's recapitalization plan, which is a vital part of that company's turnaround and puts Treasury in an excellent position to begin realizing value for taxpayers," said Treasury Secretary Timothy F. Geithner in a statement on Friday.
The Treasury could take a similar approach as it did in unwinding its bailout of Citigroup last year and begin to offload its stocks as early as this March.But the unwinding process will take time. Even after a massive stock offering this spring,[link widoczny dla zalogowanych], the government probably would still own two thirds of the company. But as with other bailed-out firms, the Treasury Department has remained adamant about its intentions to exit as quickly as is practical.
The conversion tended to dilute the company's current shareholders. To compensate them,[link widoczny dla zalogowanych], the AIG board voted to issue about 75 million warrants at 45 dollars each,[link widoczny dla zalogowanych], which will be distributed on Jan. 19 to AIG's common shareholders of record as of Jan. 13.Friday's milestone would have been unimaginable in AIG's darkest days, in the spring of 2009. In early March of that year,[link widoczny dla zalogowanych], the company posted record losses of nearly 100 billion dollars for the previous year,[link widoczny dla zalogowanych], and the government bailout swelled to a total commitment of more than 180 billion dollars.
Lawmakers called AIG "a bottomless pit" and "a very disturbing story of malfeasance, incompetence and greed." Those complaints exploded into national outrage when news came that AIG planned to pay more than 165 million dollars in bonuses to workers in mid March 2009. Congress called more hearings. Employees received death threats."Today truly marks a new beginning,[link widoczny dla zalogowanych]," said Robert H. Benmosche,[link widoczny dla zalogowanych], AIG President and Chief Executive Officer. "We recognize that we have to stand on our own and meet the expectations of the marketplace."
Fed Chairman Ben S. Bernanke said that AIG's insurance units made the bailout a safer bet than it would have been to prop up Lehman Brothers Holdings Inc.,[link widoczny dla zalogowanych], the securities firm that was allowed to fail a day before AIG's rescue on Sept. 16, 2008.Compared with three years ago,[link widoczny dla zalogowanych], AIG has become primarily an insurance company again rather than a sprawling financial conglomerate,[link widoczny dla zalogowanych], relying on core businesses such as Chartis, the international property and casualty arm,[link widoczny dla zalogowanych], and SunAmerica,[link widoczny dla zalogowanych], a domestic life insurance company that also offers retirement products.
The New York Fed said in a statement on Friday that the closing of recapitalization reflected the significant progress AIG has made in reducing the scope, risk and complexity of its operations and stabilizing its operating results. The accelerated repayment of the New York Fed freed up collateral that would enable the company to access private debt markets, an essential step toward facilitating the Treasury Department's future sale of the common stock it owns.
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