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AIG regaining confidence of creditors

14.01.2015 – The multinational insurance corporation American International Group (AIG) sold $2 billion in bonds, including 40-year securities at the insurer’s lowest yield ever. The company shows how far it has come in regaining the confidence of creditors following a 2008 bailout by the U.S. government.

AIG issued $800 million of 4.375 percent bonds due 2055 at 99.55 cents on the dollar, or about 190 basis points more than longer-dated Treasuries, according to data compiled by Bloomberg. The new debt offers a lower yield than what the company paid for $2.25 billion of 30-year bonds in July, a record-low at the time for long-dated obligations. Proceeds will be used for general purposes, which may include debt repayments.

“The ability to sell at those terms speaks to the stellar recovery of AIG and the demand for long duration assets in the market”, Scott Minerd, Global Chief Investment Officer at Guggenheim Partners LLC, said. “The environment provides a great opportunity to bring in long-term capital at reasonable rates.”

New York-based AIG, once the world’s largest insurer, received a $182.3 billion bailout 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.

According to Bloomberg data AIG also sold $1.2 billion of 3.875 percent notes due in 2035 at 99.66 cents, or 140 basis points above similar maturity Treasuries. A basis point is 0.01 percentage point.

“It is a pretty impressive recovery story when you see how far they have come”, Josh Stirling, Insurance Analyst at Sanford C. Bernstein & Co. said. “They have a strong balance sheet and are back to peddling pedestrian things that they understand, and the market has been supportive.” (vwh/mst)

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