AIG to issue millions of warrants in payback plan

NEW YORK (AP) -- American International Group Inc. said Wednesday it is moving forward with its plan to distribute 75 million warrants to allow current shareholders to buy AIG stock at a discounted price, part of the insurance giant's plan to repay taxpayer aid and free itself from U.S. government ownership.
The company, which received the largest amount of help from the government during the financial crisis, said it is free to issue the warrants now that the Federal Bank of New York and the Treasury Department have agreed to allow it to complete a recapitalization plan.
AIG expects to close the recapitalization on Friday, after which it will fully repay the roughly $25 billion in outstanding aid it owes to the Federal Reserve Bank of New York. It will also swap common stock for the $49.1 billion in preferred shares that Treasury currently holds.
"We anticipate that we will be able to deliver on our promise to the American people to repay the extraordinary assistance they provided to AIG during the financial crisis of 2008," Benmosche said in a statement.
New York-based AIG will distribute the warrants on Jan. 19. Each warrant entitles the holder to purchase one share of AIG common stock for $45, a 26 percent discount to the $61 that the stock was trading at Jan. 7, when the distribution was announced.
The stock closed Wednesday trading at $58.40, about double its price a year ago. CEO Robert Benmosche previously said the warrants were a way to be fair to current shareholders and give them a chance to benefit from the stock's gain.
All told, the New York-based company received $182 billion in aid from the Federal Reserve and the U.S. Treasury in 2008. At the time, AIG faced insurmountable losses after investments it provided with insurance-like protection collapsed and AIG could not afford to cover the losses. The company became a symbol for excessive risk on Wall Street and a touchstone of public anger.
For some time, the government expected AIG's bailout to result in massive losses, but Treasury now expects to book a multibillion profit from the investments.
After Friday, Treasury's holdings will temporarily rise to approximately 92 percent of the common stock of AIG. It will also hold a separate series of preferred shares to be issued as part of the company's buyback of the Federal Reserve Bank of New York's holdings in two AIG special investment units.
AIG said it expects the government to sell its shares of common stock on the market over time. The government has said it plans to start selling shares later this year.
In addition to the recapitalization, AIG has been repaying the aid with proceeds of multiple asset sales. Earlier Thursday it said it agreed to sell its 97.6 percent stake in Nan Shan Life Insurance Co., Taiwan's third-biggest insurer, to a local business group for $2.2 billion. Last year the company sold a cornerstone of its business, Asia-based life insurer AIA Group, in a government-approved $35.5 billion deal to British insurer Prudential PLC. It also sold American Life Insurance Co., or Alico, to MetLife Inc.