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Large AIG holders keen for government to scale back stake

"Kantor, a former U.S. Secretary of Commerce in the Clinton administration, is working with 21 AIG shareholders, including money managers Dodge & Cox, Legg Mason Inc (LM.N: Quote, Profile, Research, Stock Buzz), the $125 billion New York State Common fund, and Eli Broad, a large individual shareholder and former director of AIG."


Large AIG holders keen for government to scale back stake
Tue Nov 11, 2008 3:20pm EST

NEW YORK (Reuters) - Some of AIG's largest shareholders are working to convince federal officials to scale back U.S. ownership of the giant insurer as private investors step forward to inject capital, a lawyer representing investors said on Tuesday.

Mickey Kantor, a partner with Mayer Brown based in Washington D.C., said the U.S. Treasury and Federal Reserve had taken a "step forward, and deserve a tremendous amount of praise" for a deal reached on Monday that revised a September rescue of American International Group Inc (AIG.N: Quote, Profile, Research, Stock Buzz) as it neared bankruptcy.

The shareholders Kantor represents had been pushing for revisions since the federal government stepped in to inject $85 billion in emergency funds on September 16 in exchange for a nearly 80 percent stake.

"We believe one more step should be taken, and that is to allow private capital back into the firm," Kantor told Reuters in a telephone interview.

"That would mean the Fed and Treasury would negotiate some sort of agreement. To the extent that private capital is raised, they lower the percentage of AIG held by the federal government. That is what we are working toward."

The U.S. Treasury and Federal Reserve on Monday agreed to invest $150 billion in AIG, including $40 billion for preferred shares paying a 10 percent dividend, and $60 billion under a 5-year credit facility with a lower interest rate than the earlier agreement. Another $50 billion would be used to buy toxic mortgage assets, including those underlying AIG credit default swaps which have cost it billions of dollars in losses.

AIG shareholders have been heavily diluted by the federal rescue since it gave the United States majority ownership.

Kantor, a former U.S. Secretary of Commerce in the Clinton administration, is working with 21 AIG shareholders, including money managers Dodge & Cox, Legg Mason Inc (LM.N: Quote, Profile, Research, Stock Buzz), the $125 billion New York State Common fund, and Eli Broad, a large individual shareholder and former director of AIG.

(Reporting by Lilla Zuill, additional reporting by Joan Gralla, editing by Richard Chang)