U.S treasury makes $22.7billion profit on AIG share sale-GHL

American International Group Inc. (NYSE: AIG) state led bailout will come to an end with the U.S. treasury announces to liquidate its remaining stakes for another $7.6 billion, four years after a highly criticized acquisition. This is the sixth public offering The U.S. Treasury Department is making in respect of its 234.2 million holding in if’s shares at $32.50 each. In an e-mailed statement the treasury disclosed that the if successful current bid will accumulate total profit accruing to the U.S. to $22.7 billion.

The state acquired the New York-based company in 2008 under a bailout/ rehabilitation scheme that that measured up to almost $182.3 billion. Robert Benmosche Chief Executive Officer has divested more than $65 billion of the company’s assets to pay the consideration agreed to be paid under the plan. Retrenching from the mortgage linked derivatives he shifted his focus towards insurance products based on property-casualty, life and retirement in the U.S. market.

The insurer closed a deal to sell its plane leasing unit just this week and CEO has high hopes for future. In an inter office memo addressing employees he said his company is “leaner, more focused and hungry for tomorrow.”

The offer price of the shares is less than the closing rate of $33.36 for the stocks, yesterday on the New York Stock Exchange. The insurer’s shares leaped by 44% during the current fiscal year which outperformed Standard & Poor’s 500 Index by 13%.

After saving the insurer of almost 100,000 retirement funds, municipalities and companies the U.S. treasury ended up securing as much as 92 percent of the American International Group Inc. (NYSE: AIG)’s ownership stake. The bailout of AIG from the staggering phase it went through due to mortgage deals going bad have been criticized by few among the top tear in the state treasury. This rehabilitation plan is one such state led action to counter a fiscal deficit that made Ben S. Bernanke Chairman Federal Reserve, in his own words“more angry” than any other of its sort.

Also a part of the bailout plan were a $60 billion credit facility granted by the Federal Reserve Bank of New York, a Treasury investment to the value of $69.8 billion and almost $52.5 billion from the New York Federal department in consideration of the mortgage linked assets owned or backed by American International Group Inc. (NYSE: AIG).

The Treasury took over the shares of the company at a total cost of $47.5 billion and the department’s total earnings on the on the divestment was $4.1 billion. According to the fed’s department a major part of the $22.7 billion profit was attributed to the gains in mortgage-linked securities that it acquired the rescue. The U.S. treasury also intends to buy about 2.7 million shares of American International Group Inc. (NYSE: AIG) stock now.

Compared to a headcount of 116,000 employees and an asset base of $1 trillion that the company had at the end of 2007 the company employed a little over 57,000 persons and had an asset base of $550 billion as at the end of the current year. CEO Benmosche, who joined to run the company after his retirement from MetLife Inc., has also overseen the sales of Asian insurance companies and headquarters in based in New York and Tokyo.

The Greenhill & Co. Inc., (NYSE:GHL) will be the financial adviser and agent for American International Group Inc. (NYSE: AIG).

The shares of Greenhill & Co. Inc., (NYSE:GHL) were up 1.72% to close at $52.13. The shares of American International Group Inc. (NYSE: AIG) were up 5.70% to close at $35.26.


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Published by Viraj Shah

Viraj Shah has done M.Com (Finance) and currently pursuing CFP. He is a technical analyst who tracks US markets along with other global markets like India very closely. He is very passionate about stocks and believes that money can always be made in market.

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