AIG recap deal closes, focus moves to share sale

The recapitalization of bailed-out insurer American International Group Inc closed on Friday, leaving the government with a 92 percent stake and plans to sell its shares quickly.

The deal was intended to simplify AIG's $182 billion bailout by paying off the Federal Reserve and leaving the U.S. Treasury as AIG's majority owner. The Treasury said on Friday its cash investment in AIG is $68 billion.

Treasury remains optimistic that taxpayers will get back every dollar of their investment in AIG, Treasury Secretary Timothy Geithner said in a statement. The government stands to make a profit in the tens of billions of dollars on its AIG shares, given their appreciation over the last year.

A person familiar with the situation told Reuters on Monday a large Treasury-AIG share sale was likely after mid-May, and other sources have said in the past that Treasury likely would dispose of the stake by 2012.

The Treasury spent all day Thursday meeting bankers in New York to find the right group to manage the stock sales. The CEOs of some of the world's largest financial institutions appeared in person to make their case for what could be one of the 10 largest share offers ever.

Sources have said the banks' proposals would includes fees of no more than 75 basis points -- some $150 million for the winning banks on a $20 billion deal, but half the typical fee for a deal of this type and size. Some have said the fee could end up lower than that.

The government saved AIG from collapse in September 2008. Over the last year, the company has raised tens of billions of dollars through asset sales and IPOs of international units as it slimmed down and shifted focus.

AIG shares fell 5.9 percent to $53.84 in early afternoon trading. The stock price has fallen in recent days, and is expected to settle in the mid-$40s level by next week as recently issued stock warrants start trading.

(Reporting by Ben Berkowitz. Additional reporting by Clare Baldwin in New York and David Lawder in Washington. Editing by Robert MacMillan)