The Federal Reserve Bank of New York is considering selling assets in its Maiden Lane III LLC portfolio, which were assumed in the government bailout of American International Group Inc., the district bank said today.
“The change in the investment objective for Maiden Lane III reflects a strategic decision to explore possible sales of some of the assets in the portfolio in light of improving market conditions and the success of the Maiden Lane II sales,” Jack Gutt, a spokesman for the New York Fed, said in an e-mailed statement.
The New York Fed is seeking to accelerate the repayment of its loan to the Maiden Lane III vehicle after completing the sale this year of the assets in its Maiden Lane II LLC portfolio, another pool of debt assumed in AIG’s rescue. The central bank was owed about $9 billion under its loan to Maiden Lane III as of March 28, according to the New York Fed website.
AIG and the Fed have benefited from the rebound in mortgage-linked assets, such as those assumed in the bailout. The insurer may use proceeds from sales of Maiden Lane III assets to help buy back more stock from the U.S. Treasury Department, Josh Stirling, an analyst for Sanford C. Bernstein & Co., said in a note to clients today. AIG advanced 5.3 percent to $32.52 at 4:02 p.m. in New York, the most since February.
“The Fed will only transact if it deems that a particular transaction represents good value, is done competitively and is not market disruptive,” Gutt said. No auctions were announced.
After selling the last group of bonds in the Maiden Lane II pool in February, the New York Fed said that taxpayers earned $2.8 billion on their $19.5 billion loan to that vehicle. It was created in 2008 to buy holdings that AIG handed the Fed in exchange for a cash injection.
(Reuters) - American International Group Inc will likely be independent from the U.S. government over the next year, Wells Fargo Securities said upgrading the shares of the bailed-out insurer to "outperform."
Since AIG restructured its relationship with the US Government over a year ago, the company has made tremendous progress in reducing its government ties, Wells Fargo analyst John Hall wrote in a note to clients.
AIG had to be rescued during the financial crisis of 2008 through multiple bailouts, with the U.S. government at one point pledging $182 billion to keep the insurer afloat.
In the last few years it has been selling off non-core assets to pay back the government.
In March alone, the Treasury recovered more than $14.6 billion on its investment in AIG, including $6 billion from its sale of the insurer's stock.
AIG still owes taxpayers an estimated $45 billion for the bailout it received during the financial crisis. The government still holds a 70 percent stake in the company.
AIG now has only one remaining tie to the government apart from the 70 percent interest it holds in the company - a $9 billion interest in the SPV Maiden Lane III, analyst Hall said.
Wells Fargo expects the Maiden Lane III portfolio, created during AIG's bailout, to continue to wind down. It sees the government's stake to be reduced through a combination of secondary offerings and sales to sovereign investors as well as share repurchase.
In March, AIG sold part of its stock in AIA Group <1299.HK> to repay part of its bailout. It is also considering launching the initial public offering of its airplane leasing business ILFC in the second quarter.
Proceeds from the sales of ILFC, its remaining holdings in AIA, and the retained interest in ML III can help AIG buy back $21.3 billion of its shares, Hall said.
"(Once independent from the government), we expect AIG to become an increasingly active capital manager, which could be accretive to its earnings per share and return on equity," Hall said.
Wells Fargo raised its earnings per share estimate for the insurer for 2012 and 2013 to $3.38 and $3.06 respectively.
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