NU Online News Service, June 5, 11:1 a.m. EDT
The price tag on American International Group's sale of its holdings in reinsurer Transatlantic Holdings Inc. has been put at $1.14 billion.
New York-based Transatlantic said it has priced the sale of 26 million shares owned by AIG, also based in New York, and American Home Assurance Company, a subsidiary of AIG, at $38 per share.
AIG has also granted the underwriters a 30-day option to purchase up to an additional 3.9 million of Transatlantic stock.
Transatlantic said the offering is anticipated to close on Wednesday, subject to customary closing conditions.
J.P. Morgan Securities Inc., Goldman, Sachs & Co., Morgan Stanley & Co. Inc. and Lazard Capital Markets LLC are the underwriting managers of the sale.
In a separate action, Moody's Investor Service placed the Transatlantic "Aa3 Excellent" insurance financial strength rating on review for possible downgrade.
Moody's said the move was taken because the company's stand-alone credit profile "is more consistent with a rating in the 'A' [Good] range."
The rating service said it is concerned with the company's increased exposure to catastrophe risk relative to its capitalization going into this year's hurricane season. Fears of inflation could also hurt profitability, Moody's said.
Touching on the AIG sale of Transatlantic stock, Moody's said the sale would reduce AIG's stake in the insurer from 60 percent to 20 percent. The ownership interest could drop to as low as 14 percent if the managers exercise their options.
The stock offering announced last week is one of the latest actions by AIG to pay off billions in government bailout money and credit supports that it began receiving in September 2008, when its involvement in mortgage-based derivatives brought it to the brink of failure.
In addition to giving the government a 79.9 percent interest in the firm, AIG has been selling off financial interests and properties it holds throughout the world, including its New York headquarters building.
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