The recapitalisation of bailed-out insurer American International Group Inc closed on Friday, leaving the government with a 92 percent stake that it plans to sell quickly. Bankers were buzzing on Friday about how soon that might happen, with at least one saying he would not be surprised if the government picked the deal's managers next week and others saying the fee on the deal was already under pressure.
AIG Chief Executive Bob Benmosche, in an interview, said the company was hoping to pick the deal's managers as soon as was practical, although he gave no timeframe. Benmosche was in Washington for lunch with Treasury Secretary Timothy Geithner.
But even before Benmosche and AIG go out on a roadshow to tell their new post-restructuring story, the company's largest shareholder after the government said he had no doubt about sticking with his investment. "We are committed to AIG and looking forward to many years of happy returns," Fairholme Funds Inc's Bruce Berkowitz said in an interview. "We want to try and help AIG in any way we can, recognising that it's a huge opportunity for Fairholme and its investors."
The recapitalisation was intended to simplify AIG's $182 billion bailout by paying off the Federal Reserve and leaving the US Treasury as AIG's majority owner. The Treasury said on Friday its cash investment in AIG is now $68 billion. "Treasury remains optimistic that taxpayers will get back every dollar of their investment in AIG," Geithner said in a statement. The government stands to make a profit in the tens of billions of dollars on its AIG shares, given their appreciation over the last year.
A person familiar with the situation told Reuters on Monday a large Treasury-AIG share sale was likely after mid-May, and other sources have said in the past that Treasury likely would dispose of the stake by 2012. The Treasury spent all day Thursday meeting bankers in New York to find the right group to manage the stock sales. The CEOs of some of the world's largest financial institutions appeared in person to make their case for what could be one of the 10 largest share offers ever.
Sources have said the banks' proposals would includes fees of no more than 75 basis points - some $150 million for the winning banks on a $20 billion deal, but half the typical fee for a deal of this type and size.