AIG Targets 8% Debt in Buyback Plan for More Than $1 Billion
This article by Sonali Basak and Doni Bloomfield for Bloomberg may be of interest to subscribers. Here is a section:
American International Group Inc., the largest commercial insurer in the U.S. and Canada, has offered to buy back more than $1 billion of its bonds as the company targets debt issued when interest rates were higher.
?The insurer is redeeming notes in currencies such as the dollar, the yen and the Swiss franc, New York-based AIG said Tuesday in a statement. An offer for securities including $1.2 billion of 8.175 percent junior subordinated debentures expires April 13, subject to extension. Those bonds were issued near the depths of the financial crisis.
AIG has been repurchasing stock, expanding through acquisitions and redeeming old debt after returning to profitability and repaying a taxpayer bailout that started in 2008. Debt-reduction efforts last year cut annual interest expenses by about $250 million, the company said in a Feb. 13 conference call.
“AIG’s leverage metrics are now on par with higher rated peers” Fitch Ratings said in a statement on March 2. The firm raised its outlook on the insurer to positive, citing “improvement in AIG’s capital position and debt servicing capabilities over the past several years.”
AIG has become synonymous with the credit crisis not least because its bailout was so large and because its bailout funds were used to pay down its liabilities to other major financial sector organisations. The era of ultra-low interest rates and abundant liquidity has allowed hundreds of companies to retire old expensive debt and to reduce the weighted average cost of capital in the process. This has contributed the robust performance of the stock market over the last five years.
AIG is currently testing the upper side of a yearlong range. While it may pause for a while longer in this area, a clear downward dynamic would be required to question medium-term scope for additional upside.
AIA Group, which was spun off from AIG during its restructuring, is well diversified across Asia’s major growth markets. The share remains in a consistent medium-term uptrend and is currently reverting back towards the mean. A sustained move below HK$43 would be required to begin to question medium-term upside potential.