AIG shares soar 10% as insurer obtains $3b in credit facilities
NEW YORK (AP) Insurance giant AIG is taking another step on its road to recovery, obtaining $3 billion in credit facilities.The news sent AIG shares soaring more than 10 percent in New York Stock Exchange trading yesterday.
The New-York based company, which employs around 200 people in Bermuda, said it will be able to tap the facilities once it finishes paying back its bailouts.
American International Group Inc received the biggest government rescue of any financial company during the recent crisis. Its lifelines from the Federal Reserve and Treasury were worth $182 billion.
The $3 billion in credit facilities will be split evenly between a 364-day agreement and a three-year agreement. AIG also said that Chartis has entered a one-year, $1.3 billion letter of credit facility. There are 36 banks participating in the facilities.
The agreement builds momentum for AIG, which earlier this month raised $2 billion selling senior unsecured notes and established a $500 million contingent liquidity facility.
AIG in September announced a recapitalisation plan under which it would be able to repay the American taxpayer for the bailouts. The deal gave Treasury a 92.1 percent stake in AIG before it could begin selling its shares.
But AIG needed to prove its strength by displaying its ability to raise money from private investors.
“This success is another important vote of confidence by the market in AIG,” CEO Robert Benmosche said in a statement yesterday.
“As we approach year's end, we believe we are close enough to completing our recapitalisation plan that we can see the finish line,” he added.
AIG became a symbol for excess risk on Wall Street during the crisis that peaked in late 2008. The company sold insurance-like protection against losses on mortgage bonds and other risky investments. When the value of those investments dropped, AIG could not afford to cover the losses.
In late afternoon trading, AIG shares were up $5.70 to $60.03.