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AIG Raises $2 Billion in Debt Offering Amid Ongoing Restructuring

Strategic Insights

— 2 min read

American International Group Inc. (NYSE: AIG) has completed a $2 billion debt offering, marking its first venture into the debt market in two years. The company plans to use the proceeds for general business purposes, with the approval of the Federal Reserve Bank of New York. This move is part of AIG's broader plan to raise about $3.5 billion of capital through note sales and equity issuance in the fourth quarter of 2010 and first quarter of 2011.

AIG has filed a regulatory prospectus for the two-part notes offering, which includes $500 million in 3-year notes and $1.5 billion in 10-year notes. Both sets of notes carry a rating of "A3" and "A-" by Moody's Investor Service and Standard & Poor's, respectively. The 3-year notes will yield 3.65% with a 295 basis point spread over US Treasuries, while the 10-year notes will yield 6.4% with a 362.5 basis point spread.

This offering follows AIG's sale of its American Life Insurance Co. unit to MetLife Inc. (NYSE: MET) for $37 million earlier this month. The company still owns 20% of the American General Finance Inc. (AGF) unit, which was acquired by Fortress Investment Group LLC in an 80% stake deal for an undisclosed amount. AIG's goal is to close its recapitalization plan in the first quarter of 2011, shedding the loan owed to the US Federal Reserve and leaving the US Treasury with a 92% stake in the company.

Tenneco Inc. (NYSE: TEN) has started supplying emission and ride control systems to Nissan Motor (OTC: NSANY) for its March supermini compact car, with products manufactured in Asian operations. Recommendation and target price for short-term are Zacks Rank #3 (Hold) and long-term is Zacks Rank #3 (Neutral) for stock performance.

Key Takeaways:

  • AIG has successfully completed a $2 billion debt offering, with proceeds for general business purposes and approval from the Federal Reserve Bank of New York.
  • The offering includes $500 million in 3-year notes and $1.5 billion in 10-year notes, both with credit ratings of "A3" and "A-", respectively.
  • AIG plans to sell $3.5 billion of capital in the fourth quarter of 2010 and first quarter of 2011 through note sales and equity issuance.
  • The company still owns 20% of American General Finance Inc. (AGF), acquired by Fortress Investment Group LLC in an 80% stake deal.
  • AIG aims to close its recapitalization plan in the first quarter of 2011, shedding the loan owed to the US Federal Reserve and leaving the US Treasury with a 92% stake.
  • Tenneco Inc. (NYSE: TEN) has started supplying emission and ride control systems to Nissan Motor (OTC: NSANY) for its March supermini compact car.
  • Recommendation and target price for short-term is Zacks Rank #3 (Hold) and long-term is Zacks Rank #3 (Neutral) for stock performance.

Statistics:

  • AIG's debt offering size: $2 billion
  • Proceeds allocation: General business purposes
  • Notes rating: "A3" and "A-" by Moody's and Standard & Poor's, respectively
  • Yield of 3-year notes: 3.65%
  • Yield of 10-year notes: 6.4%
  • Spread of 3-year notes: 295 basis points
  • Spread of 10-year notes: 362.5 basis points
  • AIG's sale of American Life Insurance Co. unit: $37 million
  • Tenneco Inc.'s revenue in Q3 2010: $1.54 billion
  • Tenneco Inc.'s profit in Q3 2010: $24 million

Sources:

  • Zacks.com Analyst Blog
  • American International Group Inc. (AIG) regulatory prospectus
  • Moody's Investor Service of Moody's Corp. (MCO)
  • Standard & Poor's
  • Tenneco Inc. (TEN) press release
  • Nissan Motor (OTC: NSANY) press release

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