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.
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 firstname.lastname@example.org
To contact the editor responsible for this story: Dan Kraut at email@example.com