NEW YORK (Reuters) � American International Group Inc and the U.S. government laid out a plan for the insurer to eventually repay taxpayers in full, just over two years after it was rescued from the brink of collapse.
The plan calls for AIG to repay and end a Federal Reserve Bank of New York credit facility, and convert into common stock the $49.1 billion of AIG preferred shares held by the Treasury Department. The steps are to be completed before the end of the first quarter of next year.
The deal, reached after AIG's board met with the government on Wednesday, shows the insurer is making significant progress in disentangling itself from the government after a $182.3 billion bailout.
The repayment plan comes at a crucial time for the government. The Troubled Asset Relief Program, set up amid the 2008 financial crisis to shore up the financial industry, expires on Sunday, and the nation goes to the polls for mid-term elections in November.
Under the plan, the Treasury will get about 1.66 billion common shares for its preferred shares, raising its stake in the insurer to 92.1 percent. The Treasury will sell its stake in AIG on the open market over time.
AIG will also issue up to 75 million warrants with a strike price of $45 per share to its existing common shareholders.
The exchange of the Treasury's preferred stock will not be executed until the Fed credit facility is repaid in full.
AIG owes about $20 billion under the facility. It expects the money to come from the initial public offering of its American International Assurance (AIA) unit and the sale of American Life Insurance Co (Alico) to MetLife Inc, and other assets.
The Fed also owns preferred interest worth about $26 billion in AIA and Alico. Under the plan, AIG would effectively transfer a part of that interest to the Treasury, and pay that down through future asset dispositions.
AIG shares were up 1.9 percent to $38.15 in premarket trading on Thursday.
(Reporting by Paritosh Bansal; Editing by Derek Caney and John Wallace)
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