AIG is fund raising with more than just baked goods to pay taxpayers back. Image from Wikimedia Commons.

American International Group had to borrow money in the bailout, and a lot of it. The insurance giant took out more than $130 billion in installment loans from the taxpayers to keep from collapse, and controversy surrounded it. However, AIG is making significant progress. The company has already paid back several billion to the government, and recently had a meeting with the Treasury to figure out how to complete the debt settlement. The company is set to convert the 80 percent in preferred shares the government holds to common shares, which would be sold for fast cash.

AIG and Treasury discuss payment plan

There isn’t a company that got emergency loans from the government that doesn’t want those balances reduced to zero. AIG received about $132 billion in loans from the taxpayers, and for that generous offer of help, the government got an 80 percent stake in the preferred shares of the company. Since then, AIG has been selling sub-companies and creating capital to pay off the government. According to USA Today, AIG recently met with Treasury officials to discuss paying the loans off. The deal is reportedly for the company to be completely paid up in two years or less.

Stock sale

The bulk of the fund raising would be done via sale of stock. Currently, the government holds about 80 percent of preferred shares in AIG. Preferred shares are different from common shares, in that there are more in dividends, but are less of a security than bonds. The preferred shares the government holds would be converted to almost a 90 percent share of common stock, which would be offered by the government to investors. Should the stock price rise accordingly, the government will actually turn a profit.

Miles to go before AIG sleeps

Currently, AIG still owes the government more than $100 billion. That is a lot of money to raise in two years, for any corporation. The company has been doing well in settling accounts, as non-essential divisions have been sold off to other companies.

Sources

USA Today

AIG got billions in the bailout, and a lot of people weren't happy. The company just paid $4 billion back to the Fed. Image from Wikimedia Commons.

Insurance and finance giant American International Group has just paid back a portion of the emergency loans that it borrowed to stay afloat. The Federal Reserve received a payment recently of almost $4 billion. The company still has a long way to go until AIG has complete debt settlement with the American people. The company still owes about $97 billion and has an open credit line for the next three years. AIG recently sold a hefty portion of its finance wing. The group is battling to get itself out of debt and back into the black.

AIG makes big payment to the Fed

The Federal Reserve was recently wired a payment of nearly $4 billion by AIG, according to Forbes. AIG was lent almost $182 billion in emergency loans, when the company nearly sank in the midst of the financial crisis. Since then, the Federal Reserve has kept an open line of credit for the company, in case it needs some further loan cash. AIG has been paying on the debt, as the debt for the company is now less than $100 billion for the first time since 2008. There is an open line of credit for AIG, as the Federal Reserve has $30 billion open to AIG in case it should be needed.

Share sale makes the difference

AIG sold a large amount of shares in the finance wing of the company. The sale was for about $130 million for an 80 percent stake in American General Finance Inc., according to Bloomberg. The shares were bought by Fortress Investment Group, LLC. The sum Fortress paid makes hardly a dent in the debt, but at least it makes for a quick payday for AIG. Every little bit helps.

AIG turning things around

A new day may be dawning for AIG, or at least a healthier day. The company had to borrow money, and a lot of it, in order to stay afloat. The American people were not happy with it, especially with the news of bonuses paid after a near total failure of the company. That said, AIG did make a big payment, so perhaps AIG is on track to recovery.

Further Reading

Bloomberg

Forbes

Of all the companies the United States government has bailed out during this recession, few have drawn as intense a degree of the public’s ire as American International Group, the company that is commonly known as AIG. Their indiscriminate use of the credit default swap seemingly didn’t include any hedging at all, and thus they were unprepared when values dropped due to delinquency. The insurance monster found itself in a deep grave. It would need more than $100 billion to get out.

As you may know, the government ponied up the money – which means you and I paid to rescue the irresponsible, greedy AIG. Would the government (forget about us, cowboy) ever get its personal loans and cash advances back?

Apparently so

AIG stock could be on the way up soon, as outgoing CEO Edward Liddy believes the company has “an excellent chance” to repay the government, reports Bloomberg. The insurer has plans to pay down its massive Federal Reserve credit line of $25 billion by selling off two of its foreign life insurance interests.

They have to do something. AIG has received four bailouts so far, making their take so far $182.5 billion. Their gambles in the housing market prompted them to turn over majority stake to the government. In addition to a $60 billion credit line (are they worth it, or should they be nationalized?), there’s also $52.5 billion to buy mortgage assets and another investment of $70 billion. It’s truly staggering.

Sell, sell, sell

“We believe there is an excellent chance that we can repay the government,” Liddy said. “The government is not prepared to make any adjustments to the arrangement that turned over majority control to the U.S. My hope would be that as we make progress in the overall restructuring, that maybe those conversations will bear fruit.”

So far, AIG has put its money where its mouth is when it comes to selling off its interests. They’ve raised $6.7 billion by making deals in a variety of industries, including those with an American auto insurance company, an equipment guarantor, the title-holder for its New York headquarters and the owners of a Japanese office building. AIG is also working to sell off its airline-leasing and consumer-finance businesses, said Liddy.

“We have determined the destinies of nine of our major businesses spanning everything from life insurance in Taiwan to global real estate, and have specific plans for each of those nine,” he said. “We expect this process to advance steadily in the next six months, and may involve public offerings.”

Replacing Liddy, moving forward

Former AIG CEO Liddy no longer holds that position with the company. He has said that he will also step down from his position of board chair. He had come out of retirement to run the company after it was taken over by the United States government. His annual salary was $1. An executive search firm is currently working to find a replace for each position. Liddy urged the company to keep the two positions separate in the future.

Liddy’s departure, as well as a number of high-ranking members of the AIG board, has given investors something this doesn’t exactly resemble new hope, but it is looking upward.

“Goodbye and good riddance,” said Kenneth Steiner, who holds 10,000 AIG shares. “I hope our new directors will do a better job.”

One concerned person in attendance at a recent shareholders’ meeting was retired AIG employee Kathleen Mylott. Her reaction to her once great company and its need for bailouts seems to accurately gauge the temperature of the water: “It’s like watching your house burn down, The emotional toll has been worse than the financial toll, if you can believe that. It’s an American tragedy.”

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