AIG is offering $2 billion of debt today in two parts, including $800 million in 40-year notes that may be sold at about 190 basis points more than similar maturity Treasuries, according to a person with knowledge of the transaction. Proceeds will be used for general purposes, which may include debt repayments, said the person, who asked not to be identified without authorization to speak publicly.
“The terms they are getting are pretty darn attractive,” Matthew Duch, a money manager at Calvert Investments in Bethesda, Maryland, which oversees more than $13 billion in assets, said in a telephone interview. “They have taken steps that give investors comfort they aren’t content on being a zombie company and won’t make the same mistakes they made in the past.”
At 190 basis points more than 30-year Treasuries AIG could pay investors 4.4 percent on its planned 40-year note, according to data compiled by Bloomberg. That would be the about the same that the company paid for $2.25 billion of 30-year bonds in July, a record-low at the time for long-dated obligations, Bloomberg data show. A basis point is 0.01 percentage point.
New York-based AIG, once the world’s largest insurer, needed a $182.3 billion rescue following losses on mortgage- related debts. Chief Executive Officer Peter Hancock and former CEO Robert Benmosche shored up AIG’s creditworthiness by paying down debt, improving profitability and divesting units.
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