Bloomberg News

AIG’s $5 Billion Contribution to U.S. Rescue Fund Repaid

July 16, 2012

AIG $5 Billion Contribution to Rescue Fund Repaid, Fed Says

The Fed created Maiden Lane III to purchase $62.1 billion in collateralized-debt obligations and keep AIG from collapsing, sparing Wall Street firms losses. Photographer: JB Reed/Bloomberg

American International Group Inc. (AIG:US) has been repaid the $5 billion it contributed to a fund created in 2008 as part of the insurer’s U.S. rescue, the Federal Reserve Bank of New York said.

Sales of mortgage-related assets held in the Maiden Lane III portfolio enabled the repayment of New York-based AIG’s stake and interest, the district bank said in a statement on its website today. AIG will get one-third of the profit from further asset sales, with the New York Fed getting the rest.

The Fed’s $24.3 billion loan to Maiden Lane III was repaid last month, and AIG was scheduled receive the next $5.6 billion in proceeds, which includes interest, Jay Wintrob, the chief executive officer of AIG’s life-insurance unit, said June 13. AIG may use the cash to buy back shares, which would cut the Treasury Department’s 61 percent stake, Jimmy Bhullar, an analyst at JPMorgan Chase & Co., wrote in a July 10 note.

“We expect ongoing capital deployment to drive steady ROE improvement,” Bhullar wrote, using the abbreviation for return on equity.

The Fed created Maiden Lane III to purchase $62.1 billion in collateralized-debt obligations and keep AIG from collapsing, sparing Wall Street firms losses. Maiden Lane III was used to cancel credit-default swaps when AIG couldn’t meet collateral calls on the contracts from banks including Goldman Sachs Group Inc. (GS:US) and Societe Generale SA.

Bailed Out

Maiden Lane II, another rescue vehicle, closed in February with a $2.8 billion profit for the Fed and $1.6 billion of proceeds for AIG, which it used to repay federal aid. Treasury has cut its stake (AIG:US) in AIG from 92 percent by selling shares.

AIG shares dropped 0.5 percent to $31.28 at 4:01 p.m. in New York. The stock has gained 35 percent this year.

The insurer’s bailout swelled to $182.3 billion including a $60 billion Fed credit line, as much as $52.5 billion for the two Maiden Lane vehicles and a Treasury investment of up to $69.8 billion. The remaining investment was $30 billion as of June 14.

To contact the reporter on this story: Zachary Tracer in New York at ztracer1@bloomberg.net

To contact the editor responsible for this story: Dan Kraut at dkraut2@bloomberg.net


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Companies Mentioned

  • AIG
    (American International Group Inc)
    • $54.93 USD
    • -0.31
    • -0.56%
  • GS
    (Goldman Sachs Group Inc/The)
    • $185.29 USD
    • -0.91
    • -0.49%
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