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April 12, 2011updated 13 Apr 2017 8:49am

AIG closer to settling debt

A time restriction on American International Groups (AIG) sale of equity securities it acquired when it sold its American Life Insurance Company (Alico) to fellow US insurer MetLife has been waived by MetLife AIG announced that it agreed to sell Alico to MetLife in March 2010 for $16.2bn of which $7.2bn was in cash and the remainder in MetLife securities

By LII editorial

A time restriction on American International Group’s (AIG) sale of equity securities it acquired when it sold its American Life Insurance Company (Alico) to fellow US insurer MetLife has been waived by MetLife.

AIG announced that it agreed to sell Alico to MetLife in March 2010 for $16.2bn of which $7.2bn was in cash and the remainder in MetLife securities. The deal was closed on 1 November 2010.

Under the original terms of the sale, AIG agreed to hold the MetLife securities for at least nine months from the date of closing.

AIG received 78.2m shares of MetLife ordinary shares, MetLife preferred stock equivalent to 68.6m shares of ordinary shares and MetLife equity units with a stated value of $3bn that are ultimately convertible into at least 67.8m MetLife ordinary shares.

Under the terms of the latest agreement, MetLife gave permission to AIG to sell the ordinary shares and equity units in underwritten public offerings while MetLife purchased the preferred stock from AIG.

Sales of all MetLife equity securities held by AIG were executed on 8 March, six days after the announcement of the revised agreement.

AIG announced on 8 March that the aggregate proceeds of the sale before expenses came to approximately $9.6bn.

Also on 8 March, the US Treasury announced that it had received a $6.9bn repayment from AIG. According to the Treasury, AIG used $6.6bn of the $9.6bn of proceeds it received from the sale of its equity stake in MetLife to make the repayment.

Additionally, $300m previously held in anticipation of expenses related to the sale of Alico to MetLife was paid to the Treasury, bringing the total amount repaid to $6.9bn.

AIG noted that agreements with MetLife relating to the Alico sale require that $3bn of that amount be placed into escrow as substitute collateral for the MetLife common equity units sold.

The $3bn will be released according to agreed minimum holding periods over the next two years.

The payment to the Treasury was the fourth by AIG in 2011 and brought the total for the year to date to $36bn.

Of the total, $20.7bn was paid to the Federal Reserve Bank of New York and represented the outstanding balance owed on a credit facility extended by the bank to AIG.

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