AIG, the recipient of so much ire in the wake of the American bailouts of several banks, is now striking a deal with one of its competitors. AIG has been awash in bad press because of bonuses to its executives which the American public did not like very much–but the public should be happy to see AIG selling off its Asian unit to Prudential, a chief rival. Why? Because this means AIG has recognized that it needs to raise some capital and cut down on expenses.
Under the terms of the deal, AIG plans to pay $16 billion of the cash component back to the government to buy back preferred shares given in the bailout.
The remaining $9 billion in cash will be used to pay down the more than $25 billion outstanding under a credit facility from the New York Fed.
Shares of AIG rose 8% in premarket trading.
The deal marks yet another step in getting AIG out from the nearly $132 billion it borrowed from the federal government beginning in 2008 to avoid collapse.
That’s a good first step.