The latest sale of American International Group stock now underway by the U.S. Treasury means that the federal government has now fully recouped its investment in the company and has already made $15.1 billion, AIG and Treasury officials said Tuesday afternoon.
The decision of the government to reduce its stake so drastically prompted Standard & Poor’s to change the outlook on the AIG holding company to negative from stable, but S&P did reaffirm its ‘A-’ long-term counterparty credit rating.
“We are no longer giving credit for government support in the holding-company rating,” S&P officials say.
S&P credit analyst John Iten also says he expects Treasury to sell its remaining holdings in the “near to medium term.”
Iten says S&P changed its outlook on AIG because, while results of its core Chartis and SunAmerica operating companies are improving, the government decision to lower its ownership stake of AIG faster than expected means there is greater risk associated with paying off its current debt.
The latest sale will reduce Treasury’s ownership of AIG to 21.3 percent from the current 53.4 percent, Treasury and AIG officials say.
Treasury has also granted a 30-day option to the underwriters for the offering to purchase up to an additional approximately 83.1 million shares to cover over-allotments, if any.
That government’s ownership stake will drop to approximately 15.9 percent if the over-allotment option is exercised in full, AIG officials said.
According to S&P, the total return to the U.S. government, if all shares are sold, will be $20.7 billion.
“This offering, Treasury’s largest to date, makes America whole on its investments in AIG plus a profit,” says Robert Benmosche, AIG president and CEO.