The US Treasury took the first step in its exit from American International Group, and made a small profit, by selling $5.8bn worth of the shares it inherited in bailing out the insurance group during the financial crisis.
The shares were priced at $29, with the Treasury selling 200m shares. AIG itself sold 100m shares, raising $2.9bn for the group as it moves towards independence and attempts to rebuild its core businesses.
The price of AIG shares has fallen sharply this year, but the Treasury was still able to generate a modest profit on its $47.5bn cash injection by selling just above its break-even point of $28.73 a share.
That does not account for other elements of the $180bn bail-out.
The institutions and retail investors that bought the shares accepted a relatively small discount of 1.6 per cent to Tuesday’s closing price of $29.46.
Officials, bankers and company executives had debated pulling the offering in recent weeks as the declining stock price – and choppy market conditions – made a profitable exit tougher.
They ultimately decided to persevere but reduced the size of the offering from an initial $20bn. The $29 price was at the lower end of expectations.
However, Jim Millstein, who led the rescue of AIG for the Treasury until he stepped down earlier this year, described the deal as a “historic point in a really tough environment”.
Another person close to the offering said: “This was a huge deal – $9bn equity deals are not all that common.”
The Treasury is now subject to a 120-day lock-up period but is expected to try for a bigger sale later in the year.
It still owns some 1.4bn to 1.5bn shares of AIG, or 75 per cent of the company.
AIG did not immediately comment on the offering’s pricing.
Separately, in a regulatory filing Tuesday, AIG sought to clarify statements made during the roadshow promoting the offering to retail investors.
The company said the office of the special inspector general for the government’s troubled asset relief program did not review either the pricing or the reserves of its property insurance arm, Chartis.
The offering was led by Bank of America Merrill Lynch, Deutsche Bank, Goldman Sachs and JPMorgan.