Troubled insurance giant American International Group (AIG) has said the US Treasury completed the purchase of shares and warrants for $40 billion, which is a part of the US government's Troubled Asset Relief Program.
"Department of the Treasury has purchased four million shares of AIG series D preferred stock and a warrant to purchase a number of shares of common stock of AIG equal to 2 per cent of the issued and outstanding shares of common stock of AIG on the date of the investment for $40 billion," the company said in a statement.
AIG would use the proceeds to reduce its outstanding borrowings under the original credit agreement extended to AIG by the Federal Reserve Bank of New York in September. The maximum capacity of that credit agreement would be reduced from $85 billion to $60 billion.
The series D preferred stock, $5 par value per share, would pay a dividend of 10 per cent annually. The warrant has a term of 10 years and is exercisable for up to 5,37,98,766 shares of common stock, at an exercise price equal to the par value of the common stock at time of exercise.
Further, on Tuesday AIG had said its CEO would get a salary of only $1 and there would be no pay hikes for its top executives through 2009.
Besides, AIG has decided against no salary hike through 2009 for the 50 next-highest executives, in addition to bonus, severance and retention award restrictions.
The ailing insurance giant, for which the US government on November 11 nearly doubled the bailout package to $150 billion from $80 billion previously, is planning to sell some of its assets, including life insurance business in the US, Europe, Latin America and Japan, to recover from a financial mess.