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GAO: Feds Starting to Plan AIG Exit Strategy

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The government may sell its stake in American International Group Inc. through a public stock offering sometime after 2013, according to the U.S. Government Accountability Office.

GAO officials talk about the future of AIG, New York (NYSE:AIG), and other large recipients of federal financial assistance in a report on federal financial assistance to private-sector companies prepared for congressional committees.

The government has provided $134 billion in indirect and direct assistance to AIG, with the majority made through government investments in AIG stock, officials say.

“When AIG will be able to pay the government completely back for its assistance is currently unknown because the federal government’s exposure to AIG is increasingly tied to the future health of AIG, its restructuring efforts, and its ongoing performance as more debt is exchanged for equity,” Gene Dodaro, the acting comptroller general of the United States, writes in a letter describing the GAO’s findings.

Officials in the U.S. Treasury Department and at the Federal Reserve Board told GAO staffers that AIG must repay a Federal Reserve Bank of New York credit facility before the government’s AIG trust can dispose of its AIG stock, Dodaro says.

AIG is supposed to repay the credit facility

by Sept. 13, 2013.

Treasury officials and AIG trust trustees plan to coordinate their divestment efforts, Dodaro says.

The trustees of the AIG trust say they will begin working on an exit strategy when AIG has repaid the New York Fed, Dodaro says.

At the Treasury Department, the “team that manages the AIG investment has been running scenarios of possible exit strategies but has not decided which strategy to employ,” Dodaro says.

The AIG trust could convert its AIG Series C Preferred Stock into common stock and dispose of the common stock through a public offering or a private sale, Dodaro says.

The Treasury Department could dispose of its shares by having AIG redeem the shares; converting the shares into common stock and selling the stock through a public offering; or selling the shares to an institutional buyer or buyers through a private sale.


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