American International Group Inc. (AIG) has moved to advanced levels to list its Asian life insurance unit American International Assurance (AIA) in Hong Kong in an initial public offering (IPO) that could raise money up to $20 billion. Moving a step further today, the company has also planned to file its prospectus by Dec 25, 2009. 

Once the draft prospectus is filed by AIG, an anticipated three-month time-frame will be required to take care of the legal and other formal proceedings. Eventually, the listing of AIA in Hong Kong stock exchange is expected in the second quarter of 2010. 

AIG has appointed Morgan Stanley (MS) and Deutsche Bank AG (DB) as the global joint coordinators for the IPO. However, the fees to coordinators are expected to be enormous. Additionally, Goldman Sachs & Co. (GS), Citigroup Inc. (C) and Credit Suisse Group (CS) came forward for junior underwriter positions for the IPO. Incidentally, Goldman Sachs and Citigroup were the ones who had also advised AIG to call off the sale of AIA, earlier in 2009. 

Although AIA’s IPO is estimated to be one of the largest in the world, the costs tailing the IPO would be huge. This could also impact earnings adversely in the forthcoming quarters. Moreover, the U.S. government has a stake of 80% in AIG. As such, the government keeps a strong vigilance on the company’s payments and operational structure. Particularly, AIG is presently at a critical juncture when the company has to decide the salaries and bonuses of its executives before Feb 2010. 

However, the IPO of AIA in Hong Kong is significant for the company as it will help in the collection of funds between $10 billion and $20 billion. This amount will then be used for the part repayment of the $87 billion loan that AIG owes to the U.S. Federal Reserve ($42 billion) and the U.S. Treasury ($45 billion), as part of the bailout program entered last year. According to the deal between AIG and the U.S. government, the first $16 billion raised by the company by way of the Asian listing of AIA will go to the Federal Reserve. Still, it is anticipated that it will take at least two years or more for AIG to repay in full.
Read the full analyst report on “AIG”
Read the full analyst report on “MS”
Read the full analyst report on “DB”
Read the full analyst report on “AIA”
Read the full analyst report on “C”
Read the full analyst report on “GS”
Read the full analyst report on “CS”
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