AIG raises enough to pay off NY Fed credit line

NEW YORK (BestGrowthStock) – Bailed-out insurer AIG (AIG.N: ) raised $27.71 billion cash in 10 days with the initial public offering of its Asian life business AIA (1299.HK: ) and the sale of its global life unit Alico, enough to repay a credit facility from the Federal Reserve Bank of New York.

American International Group said on Monday it closed the sale of Alico to MetLife Inc (MET.N: ) for $16.2 billion, of which $7.2 billion was cash. That followed the October 22 sale of shares in AIA and the October 29 exercise of the over-allotment option on the sale, for gross proceeds of $20.51 billion.

AIG said it would use the cash to repay the New York Fed credit facility and make other bailout-related payments to the government.

AIG owed the New York Fed about $20 billion in principal and interest on the credit facility as of last week.

The proceeds from the deals are being put in escrow with the New York Fed until an AIG recapitalization deal, announced in September, closes in the first quarter of 2011.

The recapitalization aims to accelerate AIG’s payback of bailouts totaling $182.3 billion while repaying the New York Fed in full and leaving the U.S. Treasury Department with a 92.1 percent stake in the company.

An AIG spokesman said the company would not have any additional comment beyond Monday’s announcement.

AIG shares fell 44 cents, or 1 percent, to $41.57 in early trading. Through Friday, the shares were up 40 percent this year, against an 8.7 percent rise for the S&P insurance index. (.GSPINSC: )


Besides cash, AIG also received 78.2 million shares of MetLife common stock in the Alico deal, plus 6.9 million shares of contingent convertible preferred stock and 40 million equity units.

The common stock alone makes AIG — and by extension the U.S. government — MetLife’s largest shareholder, according to Thomson Reuters data.

The equity units convert into common shares about three years after the deal’s closing, MetLife has said. Taking all three classes of equity into account, AIG could ultimately end up with a stake in MetLife above 20 percent.

But AIG’s stake is not expected to ever get that high, as MetLife has said AIG is likely to start selling shares as soon as it can.

The lockup on the stock bars AIG from selling any stock for nine months. After that, it can sell up to half its stake, subject to dollar limits on sales. After 12 months, it can sell the rest, with continued restrictions on the size of the sales.

A MetLife spokesman was not immediately available for further comment. MetLife said last Friday the Alico deal would add more to its 2011 earnings per share than previously forecast, though it did not specify how much more.

MetLife shares rose 39 cents to $40.72 in early trading. Through Friday the stock was up 14 percent this year.

(Reporting by Ben Berkowitz; editing by John Wallace)

AIG raises enough to pay off NY Fed credit line