NEW YORK (AP) – Insurance giant American International Group Inc. on Friday moved another step closer to freeing itself from U.S. government ownership by offering all current shareholders warrants to buy shares at $45 apiece.
AIG will issue 75 million warrants on Jan. 19 to shareholders of record Jan. 13. Shareholders who exercise the warrants stand to gain 36 percent if AIG’s stock price retains its current level of about $61.
In the past year, AIG shares have more than doubled, with much of the gains coming after Sept. 30 when the company announced its plan to exit government ownership.
CEO Robert Benmosche has said the warrants were a way to be “fair to current shareholders,” and give them an option to take part in some of the stock’s upside.
Tim Massad, the Treasury’s acting assistant secretary for financial stability, said in a statement: “Taxpayers are one step closer to exiting AIG. This development reflects the substantial progress AIG has made in stabilizing and de-risking its operations, and we remain optimistic about recovering every dollar invested by taxpayers.”
In midday trading Friday, AIG’s shares gained 70 cents to $61.15.
The warrants are part of a series of actions that were announced in AIG’s September plan. According to the plan, the Treasury will own 92.1 percent of AIG shares next week. The government plans to start selling its stake later this year.
In preparation, AIG in late December obtained $3 billion in credit facilities. The agreements built momentum for AIG, which raised $2 billion selling senior unsecured notes and established a $500 million contingent liquidity facility earlier in the month.
AIG, based in New York, received the largest government rescue of any financial company during the recent crisis. Its lifelines from the Federal Reserve and Treasury were worth $182 billion.
AIG became a symbol for excessive risk on Wall Street during the crisis that peaked in late 2008. The company sold insurance-like protection against losses on mortgage bonds and other risky investments. When the value of those investments dropped, AIG could not afford to cover the losses.
Shareholders will receive 0.53 warrant for every AIG share they own. Each warrant allows the holder to purchase one share of AIG stock at an exercise price of $45 per share. The warrants will be exercisable through Jan. 19, 2021. The Treasury will not receive any of the warrants.
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