US to slash its AIG stake to below 50 percent

CNBC's Mary Thompson reports the Treasury will become a minority shareholder for the first time since the bailout.

By Roland Jones, NBC News

The U.S. government is moving to exit one of its most significant bailouts since the 2008 financial crisis, selling more of its shares in American International Group and decreasing its holdings in the world?s biggest insurer to below a majority stake for the first time in about four years.

The U.S. Treasury Department said Sunday it has launched an offering of $18 billion of its AIG common stock with a par value of $2.50 per share. If there is more demand for the stock the government said it will grant the underwriters a 30-day option to buy an additional $2.7 billion of its stake in the company.

The Treasury was expected to sell stock in the insurer this month, but the size of the planned $18 billion offering was surprising. It would take the government?s stake in AIG to around 20 percent from the 53 percent it currently holds.

The Treasury stepped in to rescue AIG in the depths of the financial crisis four years ago as the insurer stood on the cusp of collapse after suffering huge losses from investments in derivatives.

The company received $182 billion from the government. It was the largest of the Wall Street bailouts handed out by the government to prop up the financial markets, AIG and the automotive industry.

The AIG bailout left the government with a 92 percent stake in the company. It has sold off shares on four occasions since then to reduce its stake, most recently unloading about $5 billion in early August.

For its part, AIG has jettisoned various units to raise money to pay off its debt to taxpayers. AIG said it plans to buy $5 billion of its own stock when the government sells its shares, and it recently sold part of its stake in the Asian insurer AIA last week to raise funds for the stock buyback.

The government?s AIG stock sale comes as President Obama campaigns for a second term. He has faced criticism for decisions his administration made to use taxpayer money to bolster companies during the financial crisis, although the decision to bail out AIG was taken at the tail end of the Bush administration in late 2008.

The Obama administration has been unloading its positions in financial crisis programs ahead of the election. More than 300 small banks having yet to repay taxpayers.

The government also still owns 74 percent of Ally Financial, the former General Motors auto finance unit that was bobbled by bad mortgage loans during the crisis, and it has redeemed all of its holdings of Citigroup except for $3 billion of preferred securities on which it receives an 8 percent dividend.

Reuters contributed to this report.

Source: http://marketday.nbcnews.com/_news/2012/09/10/13779293-us-government-to-slash-aig-stake-to-below-50-percent?lite

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