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September 14, 2010 Tuesday 2:23 PM EST
NEWS & COMMENTARY; Markets
In exit plan, AIG may be 90% owned by U.S.: WSJ
Alistair Barr, MarketWatch mailto:ABarr@marketwatch.com.
Alistair Barr is a reporter for MarketWatch in San Francisco.
SAN FRANCISCO (MarketWatch) — American International Group Inc. and the U.S. government are in talks to speed up the insurer’s path to independence, but the plan may involve taxpayers owning at least 90% of the company for a while, The Wall Street Journal reported Tuesday.
In the plan, which could start as early as the first half of 2011, the Treasury Department will probably convert $49 billion in AIG preferred shares it holds into common stock. That would bring the government’s stake in AIG (AIG) up to more than 90% from the current 79.8%, the newspaper said, citing unidentified people familiar with the matter.
The common shares would then be sold by the government to private investors. That could potentially earn the government a profit if the shares climb, the Journal added.
However, this exit could take years and the success of the plan would depend on market conditions and on the company’s ability to persuade private investors that it can generate consistent profit from its main insurance businesses, the Journal reported.
The U.S. government committed more than $100 billion to save AIG from bankruptcy in 2008. The company is trying to pay that back with money raised from sales of businesses like Alico and AIA.
AIG has to repay the New York Federal Reserve first. After that, it can tackle the preferred stock held by the Treasury. Some type of conversion into common stock had been expected.
Shares of AIG fell 2% to $36.15 in afternoon trading Tuesday.
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September 15, 2010