AIG and U.S. Set Faster, Riskier Exit Path
AIG plans to use the proceeds from future asset sales, including the sale of two Japanese life insurance units, to retire the remainder of the Fed’s stake.
Prudential Financial Inc clinched a deal for the Japan units — AIG Star Life Insurance Co Ltd and AIG Edison Life Insurance Co — for $4.2 billion in cash.
AIG Credit Facility, formed in January 2009 to hold the government’s stake in the company, will be dissolved, further reducing the number of parties at the table.
“As we move into 2011, we will be dealing with one owner in the U.S. government instead of several,” Benmosche said.
The plan also has a sweetener for existing shareholders, who will see their holdings diluted. AIG plans to issue them up to 75 million warrants with a strike price of $45 per share.
Benmosche said it was a way to be fair to them, “if it is such a windfall for the government at the expense of the current shareholders.”
Benmosche, speaking at his office at AIG’s headquarters in Manhattan, said the plan creates clarity for clients and employees. Having the Fed out, which took a senior position in the capital structure of AIG, would allow the company to again persuade banks to give it loans.
AIG is already in talks with banks and expects to have about $3 billion of credit lines as the Fed exits, Benmosche said.
AIG also plans a $2.5 billion equity offering, including issuance of new shares, and a small debt sale by March, a source familiar with the situation said.
AIG is also moving forward on asset dispositions, including the $15.5 billion sale of Alico to MetLife Inc by the end of the year, and listing of AIA in Hong Kong next month. It plans to make the domestic life and global property-casualty operations core to the company going forward.
Benmosche said the company expects about $12 billion in proceeds from AIA listing, although the valuation was being worked out. He dismissed concerns about the offering that surfaced after U.S. insurer Liberty Mutual Agency Corp postponed a $1.2 billion IPO, saying the businesses were different.