The FINANCIAL — American International Group, Inc. (AIG) announced on November 1 that it has raised nearly $37 billion to repay the United States government through its sale of one insurance subsidiary, American Life Insurance Company (ALICO), and the initial public offering of a second, AIA Group Limited (AIA).
The FINANCIAL — American International Group, Inc. (AIG) announced on November 1 that it has raised nearly $37 billion to repay the United States government through its sale of one insurance subsidiary, American Life Insurance Company (ALICO), and the initial public offering of a second, AIA Group Limited (AIA).
AIG closed on November 1 the sale of ALICO to MetLife, Inc. (MetLife) for approximately $16.2 billion, including approximately $7.2 billion in cash and the remainder in MetLife securities. The $7.2 billion cash portion of the consideration includes an upward purchase price adjustment of approximately $400 million pursuant to the terms of the purchase agreement between MetLife and AIG.
On October 22 and 29, respectively, AIG disclosed in regulatory filings that the gross proceeds from the initial public offer of AIA were $17.8 billion and the exercise of the over-allotment option for this offering increased the gross proceeds to $20.51 billion.
Together, the AIA and ALICO transactions raised approximately $36.71 billion, $27.71 billion of which was in cash proceeds.
"AIG expects to use the cash proceeds from the ALICO and AIA transactions to repay the credit facility extended to AIG by the Federal Reserve Bank of New York (FRBNY) and to make payments on other interests owned by the government, under terms of the Agreement in Principle announced by AIG as part of its recapitalization plan on September 30, 2010. The MetLife securities will be sold over time, subject to certain lock-up provisions and market conditions, to provide additional funds to repay the government," AIG informs.
"We promised the American taxpayers we would repay them and the initial public offering of AIA last week and the completion of the ALICO transaction move us closer to delivering on our promise," said Robert H. Benmosche, AIG President and Chief Executive Officer. "These transactions will generate sufficient cash to allow AIG to pay off the FRBNY credit facility, marking a major milestone in our commitment to repay the American taxpayers."
Proceeds from the transactions are being placed in an escrow fund with the FRBNY until the closing of the recapitalization plan, expected no later than the first quarter of 2011.
As of October 27, 2010, the principal and interest owed to the FRBNY on the credit facility was approximately $20 billion.
"As we said on September 30, AIG will restructure itself around its core property casualty and life and retirement services businesses, which are performing well, and will provide our company with a strong foundation to build value for all stakeholders going forward," Mr. Benmosche said.
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