AIG’S BOARD is set to finalise a restructuring plan today, which paves the way for the US government to sell an 80 per cent stake in the insurer it rescued in 2008 and could contain a sweetener for existing shareholders.
Sources said AIG directors were expected to discuss formally for the first time the US treasury’s plan to convert $49 billion (€36.1 billion) in preferred shares into common stock.
The treasury could then sell the stock in the market over a period of time as it has with its investment in Citigroup. AIG and the treasury declined to comment.
AIG board’s approval for the plan would be a significant step in freeing the insurer of government control and repaying US taxpayers for the $182 billion of public money injected into the group in 2008. Official estimates of the government’s ultimate loss range from $36 billion to $50 billion but AIG executives and officials are hopeful that the plan will deliver a significantly better outcome.
However, some AIG executives are worried that the conversion would lead to the issuance of a large amount of common stock and result in a severe dilution in the value of the holdings of non-government shareholders.
Although the insurer has warned investors in regulatory filings of the dilution, the company might try to cushion the blow.
A plan being considered involves an offer of warrants giving the holders the right to buy AIG shares in the future at a discount to the current price.
“This would give other people the chance to buy shares on the cheap as well,” said a person familiar with the deal. – (Copyright The Financial Times Limited 2010)
