NEW YORK (Reuters) - American International Group Inc’s (AIG.N) choice of banks to lead a massive share sale left out two that played key roles in the insurer’s restructuring -- Citigroup Inc (C.N) and Morgan Stanley (MS.N).
But they are still likely to get a big piece of the action as the U.S. government sells down its 92 percent stake in the insurer, a source with direct knowledge of the matter said.
AIG and the U.S. Treasury Department are likely to name about half dozen more bookrunners to sell shares in a planned $15 billion-plus offering, sources familiar with the matter said.
Citigroup and Morgan Stanley are likely to be among the four to eight joint bookrunners to be brought in closer to the offering, one of the sources said.
Citigroup and Morgan Stanley are also likely to find roles as lead coordinators in subsequent offerings of the government’s stock in AIG, the source said.
The Treasury will be left with AIG stock worth tens of billions of dollars after the first offering, expected to take place sometime after May 15.
AIG chose Bank of America Corp (BAC.N), Deutsche Bank AG (DBKGn.DE), Goldman Sachs Group Inc (GS.N) and JPMorgan Chase Co (JPM.N) to lead the sale of part of the government’s stake and primary offering of shares.
That left out Citigroup and Morgan Stanley. Citigroup, which was seen as having an inside track, has been a restructuring adviser for AIG and was also one of the joint lead arrangers of a $4.3 billion bank credit lines to the insurer. Morgan Stanley has advised the government since the insurer’s near collapse in September 2008.
Citigroup and AIG declined to comment, as did Morgan Stanley. The sources are anonymous because these discussions are not public.
The banks will ultimately split a fee capped at 75 basis points of the deal’s value and likely to end up closer to 50 basis points, sources have said. On a $15 billion deal the lower value would equal $75 million -- far less than banks usually expect on a deal this size.
AIG has the right to select the syndicate with the Treasury’s consent in the first share sale, while the government will choose the banks in later offerings, the source said.
The choice of the banks to lead the first share sale was ultimately a consensus decision, a third source said. Both sides had veto power, but the source said the veto was never used or even contemplated.
Among the banks that AIG selected for the first offering, Goldman had the advantage of having worked on a successful initial public offering of AIG’s Asian life insurance unit, AIA Group Ltd (1299.HK).
JPMorgan, which was another lead arranger for the bank credit lines to AIG, has done diligence on Financial Products, the unit behind the insurer’s downfall during the financial crisis, one of the sources said.
That means JPMorgan can assure investors the problems around Financial Products are behind the insurer, likely a key question during the roadshows, the source added.
Deutsche Bank’s strength in international distribution, aid in unwinding Financial Products trades and work with the Treasury in auctioning off warrants related to the crisis-era bailouts helped, the source said.
Bank of America was the company’s restructuring adviser along with Citigroup. AIG had room in the syndicate for one of their two primary advisers and they chose Bank of America, the source said.
AIG’s shares were off 1.5 percent at $52.37 during midday trading on the New York Stock Exchange.
Reporting by Paritosh Bansal, Clare Baldwin and Ben Berkowitz; Editing by Robert MacMillan