AIG pays back a large chunk of bailout loans
By Lilla Zuill |
December 3, 2009, Thursday
|
Print Edition
Print Edition
BAILED-OUT insurer American International Group said on Tuesday it had closed a pact with the New York Federal Reserve that slashes its debt under a credit facility by more than half, to US$17 billion.
The deal is a big step in AIG Inc's efforts to repay loans from a massive taxpayer bailout, and also moves it closer to spinning off two big life insurance units, which could bolster its financial position further.
AIG said that as of December 1, the outstanding principal balance owed to the New York Fed, from loans received as part of the 2008 bailout, had been reduced to US$17 billion.
That compares with an outstanding balance of about US$45 billion last week, including interest and fees.
AIG shares rose more than 11 percent to US$31.72, partly reversing a steep fall in the stock on Monday after investors were spooked by concerns over a possible shortfall in reserves for non-life insurance claims.
The debt reduction is the result of a deal first announced last March to give the New York Fed a preferred stake in two of AIG's biggest life insurance units, American Life Insurance Co and American International Assurance, effectively swapping debt for equity.
"AIG continues to make good on its commitment to pay the American people back," Chief Executive Robert Benmosche said in a statement, which also warned of volatility.
The deal is a big step in AIG Inc's efforts to repay loans from a massive taxpayer bailout, and also moves it closer to spinning off two big life insurance units, which could bolster its financial position further.
AIG said that as of December 1, the outstanding principal balance owed to the New York Fed, from loans received as part of the 2008 bailout, had been reduced to US$17 billion.
That compares with an outstanding balance of about US$45 billion last week, including interest and fees.
AIG shares rose more than 11 percent to US$31.72, partly reversing a steep fall in the stock on Monday after investors were spooked by concerns over a possible shortfall in reserves for non-life insurance claims.
The debt reduction is the result of a deal first announced last March to give the New York Fed a preferred stake in two of AIG's biggest life insurance units, American Life Insurance Co and American International Assurance, effectively swapping debt for equity.
"AIG continues to make good on its commitment to pay the American people back," Chief Executive Robert Benmosche said in a statement, which also warned of volatility.
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