AIG plans IPO of arms to repay $25 billion debt
26 Jun 2009
The US government has agreed to accept $25 billion of preferred stock in two American International Group Inc (AIG) arms, the company said on Thursday.
The company will place its subsidiaries, American International Assurance Co. (AIA) and American Life Insurance Co. (ALICO) for initial public offerings (IPOs).
The deal, which is expected to close in the second half of 2009, will cut AIG's debt obligation under a Federal Reserve Bank of New York credit facility to $15 billion.
In a bid to prepare the franchises for the IPOs, AIG said it has entered into a deal with the Federal Reserve that will hand over equity to AIA and ALICO into different special purpose vehicles (SPVs).
According to a press release, AIG will get preferred and common interests in the SPVs, while the US central bank will get preferred interests of $16 billion in the AIA special purpose vehicle and $9 billion in the ALICO special purpose vehicle.
AIG will benefit if the IPOs yield more than the preferred interests.