AIG to price convertible equity units, stock to raise $7.5 billion; units talked 8%-8.5%, up 18%-22%

By Rebecca Melvin

New York, May 8 - American International Group Inc. plans to price concurrent offerings of three-year convertible equity units and common stock, totaling $7.5 billion, next week, according to a market source Thursday.

The equity units, with a unit price of $75 each, were talked to yield a coupon of 8% to 8.5% with an initial conversion premium of 18% to 22%.

The units will be non-callable, with maturities staggered in 2011, for one third settling Feb. 15, 2011, one third settling May 1, 2011 and one third settling Aug. 1, 2011.

The units also have dividend protection via a conversion ratio adjustment and make-whole change-of-control protection.

Citigroup and J.P. Morgan Securities Inc. are joint bookrunners of the equity units, with Banc of America Securities LLC, Merrill Lynch, Morgan Stanley & Co. Inc., UBS and Wachovia acting as co-managers.

Pricing is expected during the week of May 12.

New York-based AIG is a provider of insurance and financial services.

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