U.S. buys $40 billion of AIG stock
The Department of the Treasury yesterday agreed to purchase $40 billion of AIG’s preferred and common stock as part of the Troubled Assets Relief Program.
The Department of the Treasury yesterday agreed to purchase $40 billion of AIG’s preferred and common stock as part of the Troubled Assets Relief Program.
New York-based American International Group Inc. announced that it would sell 4 million shares of Series D fixed-rate cumulative perpetual preferred stock, par value $5 per share, and a warrant to buy nearly 54 million shares of common stock, par value $2.50 per share.
The insurer posted the terms of its agreement with the Treasury Department in a filing with the Securities and Exchange Commission.
As part of the agreement, AIG won’t be able to declare or pay any dividends on its common stock or on any series of its preferred stock unless all dividends are paid on its Series D preferred stock for all previous dividend periods.
The insurer may also redeem its Series D preferred stock at any time that the trust established for the Treasury Department owns less than 30% of AIG’s voting securities.
Additionally, AIG’s senior executives have waived their right to file legal claims against the insurer or the Treasury Department for making any adjustments to their compensation or benefits.
The Treasury Department also has agreed that it won’t exercise any voting rights with respect to the 53.7 million shares of common stock.
The Treasury Department’s warrant over the common stock will last 10 years.
AIG also announced that it has delayed payments under its retention program for its chief financial officer, David Herzog, and its executive vice president, Jay Wintrob.
The first payment installment has been pushed back to April 2009 from December 2008, while the second installment has been postponed to April 2010 from December 2009.
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