By Paritosh Bansal Paritosh Bansal  – Wed Sep 29, 3:46 pm ET

NEW YORK (Reuters) – American International Group Inc is seeing plans to free itself of U.S. government support start to come together two years after it was bailed out and expects taxpayers to profit from their investment.

AIG is close to finalizing a plan for the government to sell its stake in the insurer, which would see the Treasury Department convert $49 billion of preferred stake into common shares to be sold over time, Chairman Steve Miller said on Wednesday.

AIG also is close to a deal to sell two life insurance units in Japan to Prudential Financial Inc for about $4.8 billion in cash, a source familiar with the matter said.

The developments show AIG is making significant progress in disentangling itself from the government, although it still has a long way to go before the U.S. taxpayers get paid back in full for their $182.3 billion rescue package.

An announcement of the repayment plan, which another source said could come within days, would also mark a big win on a politically charged bailout for the government at a crucial time. The $700 billion Troubled Asset Relief Program, or TARP, set up amid the 2008 financial crisis expires on Sunday and the United States is set to go to polls for mid-term elections in November.

AIG has not drawn on all the assistance and needs to pay back around $100 billion, with the money going to the Federal Reserve Bank of New York and the Treasury. The government also owns nearly 80 percent of AIG.

“We want to get the total to zero,” Miller told reporters on the sidelines of a conference. “If we are successful and do as well as we hope then actually the government would have walked away with a big profit.”

Miller, a corporate turnaround specialist, alluded to his role at Chrysler in early 1980s, when the government made a roughly $300 million profit for backing a $1.2 billion loan to the automaker.

Chrysler had a 10-year deal with the government and paid it back in three years, Miller said.

Still, a profitable exit for AIG will require patience and several factors to line up favorably, such as macro trends in life and general insurance that AIG sees as its core, Aite Group senior analyst Clark Troy said.

“To exit at a big profit, there needs to be dynamism,” Troy said. “There needs to be a highly positive feeling about their operating results and their prospects for growth.”

AIG shares were up 1 percent at $37.70 on the New York Stock Exchange on Wednesday afternoon.

BOARD MEETING

The insurer’s board is meeting later on Wednesday to discuss the exit plan, Miller said at the Dow Jones Private Equity Analyst conference in New York.

Miller, who took over as chairman of the company in July, said that talks with the government were nearing a conclusion that could be a “win-win” deal for stakeholders.

But he pointed to complexity of negotiations, saying the plan had to work for several different parties like the Treasury, the Fed, the trust that holds the Treasury’s stake as well as the ratings agencies.

“We are talking to several different parties in the government. And we are working off documents that were created with care but with haste two years ago when the world was falling apart,” Miller said.

Miller said the exit plan will give AIG the ability to issue new debt.

“We think with the clarity of what we hope to get done here in the current discussions, we will be able to re-access the public markets sometime over the next six months to a year,” he said.

A conversion of the Treasury’s preferred stock into common could start as soon as the first half of next year and will see the government’s stake in the insurer increase to more than 90 percent before being sold over time, sources have previously told Reuters.

“It will be a matter of balancing the speed of exit versus maximizing the value realized by the taxpayers,” Miller said.

AIG’s board would finalize the exit plan on Wednesday and could announce the plan on Thursday, CNBC reported, citing senior government officials.

PRUDENTIAL DEAL

A deal to sell AIG Edison Life Insurance Co and AIG Star Life Insurance in Japan to Prudential, which the source said is expected to be announced soon, will be the latest divestment by the company in its repayment efforts.

Prudential, which already has a significant presence in Japan, said earlier this month it sees sustainable growth potential there, driven by an aging population and demand for retirement and savings products.

“They have a strong franchise their and it strengthens their position there even further,” Troy said.

The U.S. insurer also is flush with cash, Troy said. “It was presumed that Prudential was going to make an acquisition.”

Prudential and AIG declined to comment on the expected deal. The source is anonymous because the deal is not yet public.

Prudential’s shares were up 1.2 percent at $56.46 on the New York Stock Exchange on Wednesday afternoon.

The bailout terms call for the Fed to be paid back before the Treasury. AIG still owes the Fed about $20 billion under a credit facility. The Fed also owns some $25 billion worth of preferred interest in two of AIG’s foreign life insurance units that must be monetized.

AIG also expects billions more to come in by the end of the year as it closes on the sale of American Life Insurance Co to MetLife Inc for $15.5 billion in cash and stock, and lists AIA Group in Hong Kong to raise an estimated $15 billion.

Miller said the stock component of the MetLife deal was an important asset, but “not one that we want to hang on to forever.”

“That would be a part of the package that would give the government exposure that’s diversified — not just AIG,” Miller said.

(Reporting by Paritosh Bansal in New York and David Lawder in Washington, additional reporting by Soyoung Kim; Editing by Robert MacMillan and Matthew Lewis)

– 1 hr 41 mins ago

TOKYO (Reuters) – Japan’s Takefuji Corp (8564.T) plans to file for bankruptcy on Tuesday with $5.2 billion in debts, sources said, making it the biggest consumer lender to fail under the weight of court-ordered interest repayments and tighter lending rules.

Takefuji, which has been considered at risk for failure because it doesn’t have the financial backing of any of Japan’s big banks, will ask Japan’s courts in the afternoon to protect it from creditors and will make an announcement later in the day, two sources told Reuters on condition they weren’t identified.

A Takefuji spokesman declined to comment.

Shares of Takefuji were overwhelmed with sell orders for a second day on Tuesday.

On Monday, the shares were initially suspended by the Tokyo Stock Exchange after Japanese media reported that Takefuji was headed for bankruptcy. Once trade resumed near the end of the session, the stock remained untraded due to a glut of sell orders.

Takefuji said on Monday that it had not decided to file for bankruptcy, but would not comment on whether it was considering such a move. “It is untrue that we made such a decision as some media have reported,” it said in a statement.

But the Tokyo exchange has placed Takefuji on watch for potential delisting, citing the possibility that the company could file for court protection.

Consumer lenders have been struggling for survival after a Japanese court ruled in 2006 that they had charged too much interest and had to reimburse borrowers. The industry has also been hit by a lowering of the maximum interest rate on loans.

Shares of other consumer lenders rose on Tuesday after having fallen sharply the previous day. Aiful Corp (8515.T) rose 2.2 percent and Acom Co (8572.T) gained 1.3 percent, while Promise (8574.T) was flat.

Consumer finance companies emerged as big lenders in the 1990s as Japan’s economy tanked and commercial banks reined in credit. Able to borrow at very low rates, they charged interest of nearly 30 percent, which allowed them to absorb high default rates on uncollateralized loans.

Started as a small money lender in 1966, Takefuji grew to become Japan’s biggest consumer finance company. Its founder Yasuo Takei was ranked by Forbes as Japan’s second-richest person in 2005, worth $5.6 billion.

His company became known for airing a series of TV commercials featuring a group of spandex-clad dancers.

But a series of scandals over heavy-handed debt collection and the conviction of Takei, who in 2004 received a three-year suspended sentence for ordering wiretaps on journalists who had criticized his company, marked the beginning of a crackdown by authorities on a business seen by some industry critics as little better than loan sharking.

Takei never witnessed the demise of his company’s fortunes, having died in 2006. Forbes this year valued his widow’s worth at $2.5 billion.

Japan’s consumer finance squeeze culminated this year with a state-engineered credit crunch. In June the government capped interest rates at 20 percent, down from 29.2 percent, and limited the amount individuals can borrow to a third of their income.

Takefuji had 433.6 billion yen ($5.2 billion) in liabilities as of the end of June, research firm Tokyo Shoko Research said. Outstanding debt in bonds amounted to 134.9 billion yen, including 30 billion yen in straight bonds, 52.2 billion yen in U.S. dollar denominated global bonds, 42.4 billion yen in convertible bonds and 10 billion yen in euroyen bonds.

Standard & Poor’s Rating Services on Monday lowered its rating on Takefuji’s long-term counterparty credit and senior unsecured debt a notch to CC from CCC-, categorizing the lender’s bonds as very speculative.

“The company’s funding ability may be further constrained if business counterparties move to adopt a more cautious stance toward Takefuji,” the rating agency added.

Acom is seen as the strongest financially among the top four consumer lenders, due in large part to its ties with Mitsubishi UFJ Financial Group (8306.T), which has a 37 percent stake. Promise is about 20 percent owned by Sumitomo Mitsui Financial Group (8316.T).

Tougher credit rules and interest repayments have already claimed several victims. Credia became the first listed consumer finance firm to fold in 2007 while SFCG Co, a lender to small companies, failed in 2009 with more than $3 billion in debts.

Late last year, Aiful staved off bankruptcy by convincing its creditors to defer about 280 billion yen in bank loan principal payments, using a debt rescheduling procedure called “alternative dispute resolution.

(Reporting by Taro Fuse. Taiga Uranaka and Noriyuki Hirata, writing by Tim Kelly; Editing by Nathan Layne and Chris Gallagher)

By ALEX VEIGA, AP Real Estate Writer Alex Veiga, Ap Real Estate Writer  – Fri Sep 24, 4:43 pm ET

LOS ANGELES – KB Home said Friday it narrowed its fiscal third-quarter loss, as the homebuilder booked fewer write-downs and higher average selling prices helped boost revenue.

But the company’s backlog, which represents future housing revenue, dropped, and net orders fell 39 percent, as demand slowed after federal homebuyer tax credits expired in April.

President and CEO Jeffrey Mezger said orders in June — traditionally one of the builder’s best-selling months — fell by half versus the same month last year. Orders gradually improved as the summer unfolded, but they remained well below prior-year levels.

“While we have seen improvement in our net orders over the past few months, sales remain soft and the weak economy continues to be a major impediment to any housing recovery,” Mezger said.

The economic downturn, high unemployment and tight credit continue to keep many from buying homes, even with some of the lowest mortgage rates in decades. Demand for homes plunged to historic lows this summer following the end of the homebuyer tax credits.

The Commerce Department said Friday that new home sales in August were unchanged from July, but declined 29 percent from the same month last year.

Builders also face competition from a glut of unsold homes. At the current sales pace, it would take about a year to exhaust the supply of previously occupied homes on the market. Homes lost to foreclosure, which are expected to eclipse the 1 million mark this year, could further add to that glut, and put pressure on builders to lower prices.

So far, KB has been able to hold the line on prices overall, but Mezger noted that could change.

“Our primary goal right now is to hold margins,” he said. “On a community specific basis, we may need to get more aggressive as the quarter unfolds, if the markets don’t improve …”

KB Home said it lost $1.4 million, or 2 cents a share, in the three months ended Aug. 31. That compares with a loss of $66 million, or 87 cents a share, a year earlier.

The quarter’s results included $3.3 million in inventory impairment and land option contract abandonment charges. This is considerably lower than the $47.7 million for similar charges in the prior-year period.

Revenue rose 9 percent to $501 million, the first year-over-year increase in almost four years,

The performance was much better than the loss of 15 cents per share and revenue of $477.8 million that analysts polled by Thomson Reuters expected. These estimates usually take out one-time items.

The builder’s shares rose 40 cents, or 3.4 percent, to $12.11.

KB Home, based in Los Angeles, builds homes to order for entry level, move-up buyers and seniors in 11 states and Washington, D.C.

It closed the quarter with a backlog of 2,169 homes, indicating potential future housing revenue of about $455.3 million. This is below the prior-year’s total, which was 3,722 homes with potential revenue of approximately $734.1 million.

On the order front, KB faced a tough comparison to the third quarter last year, when it posted a 62 percent jump in contracts. Net orders fell to 1,314 compared with 2,158 a year earlier.

Still, the builder’s average selling price was a bright spot, climbing 6 percent to $214,200. And the number of homes delivered increased 4 percent to 2,320.

The company’s cancellation rate was slightly higher at 21 percent. It was 20 percent the year before.

Ticonderoga Securities analyst Stephen East said in a research note that the builder’s orders were “a disaster,” but noted the company’s average selling price suggests KB “is no longer in the business of driving volumes, but instead, in the business of driving profits.”

___

By ALEX VEIGA, AP Real Estate Writer Alex Veiga, Ap Real Estate Writer   – Fri Sep 24, 4:43 pm ET

LOS ANGELES – KB Home said Friday it narrowed its fiscal third-quarter loss, as the homebuilder booked fewer write-downs and higher average selling prices helped boost revenue.

But the company’s backlog, which represents future housing revenue, dropped, and net orders fell 39 percent, as demand slowed after federal homebuyer tax credits expired in April.

President and CEO Jeffrey Mezger said orders in June — traditionally one of the builder’s best-selling months — fell by half versus the same month last year. Orders gradually improved as the summer unfolded, but they remained well below prior-year levels.

“While we have seen improvement in our net orders over the past few months, sales remain soft and the weak economy continues to be a major impediment to any housing recovery,” Mezger said.

The economic downturn, high unemployment and tight credit continue to keep many from buying homes, even with some of the lowest mortgage rates in decades. Demand for homes plunged to historic lows this summer following the end of the homebuyer tax credits.

The Commerce Department said Friday that new home sales in August were unchanged from July, but declined 29 percent from the same month last year.

Builders also face competition from a glut of unsold homes. At the current sales pace, it would take about a year to exhaust the supply of previously occupied homes on the market. Homes lost to foreclosure, which are expected to eclipse the 1 million mark this year, could further add to that glut, and put pressure on builders to lower prices.

So far, KB has been able to hold the line on prices overall, but Mezger noted that could change.

“Our primary goal right now is to hold margins,” he said. “On a community specific basis, we may need to get more aggressive as the quarter unfolds, if the markets don’t improve …”

KB Home said it lost $1.4 million, or 2 cents a share, in the three months ended Aug. 31. That compares with a loss of $66 million, or 87 cents a share, a year earlier.

The quarter’s results included $3.3 million in inventory impairment and land option contract abandonment charges. This is considerably lower than the $47.7 million for similar charges in the prior-year period.

Revenue rose 9 percent to $501 million, the first year-over-year increase in almost four years,

The performance was much better than the loss of 15 cents per share and revenue of $477.8 million that analysts polled by Thomson Reuters expected. These estimates usually take out one-time items.

The builder’s shares rose 40 cents, or 3.4 percent, to $12.11.

KB Home, based in Los Angeles, builds homes to order for entry level, move-up buyers and seniors in 11 states and Washington, D.C.

It closed the quarter with a backlog of 2,169 homes, indicating potential future housing revenue of about $455.3 million. This is below the prior-year’s total, which was 3,722 homes with potential revenue of approximately $734.1 million.

On the order front, KB faced a tough comparison to the third quarter last year, when it posted a 62 percent jump in contracts. Net orders fell to 1,314 compared with 2,158 a year earlier.

Still, the builder’s average selling price was a bright spot, climbing 6 percent to $214,200. And the number of homes delivered increased 4 percent to 2,320.

The company’s cancellation rate was slightly higher at 21 percent. It was 20 percent the year before.

Ticonderoga Securities analyst Stephen East said in a research note that the builder’s orders were “a disaster,” but noted the company’s average selling price suggests KB “is no longer in the business of driving volumes, but instead, in the business of driving profits.”

___

– Thu Sep 23, 8:12 am ET

LONDON (AFP) – World oil prices retreated on Thursday, dragged down by downbeat equity markets and after an unexpected rise in US crude inventories, traders said.

Brent North Sea crude for delivery in November shed 75 cents to 77.20 dollars a barrel in early afternoon London trade.

New York’s main contract, light sweet crude for November, dipped 62 cents to 74.09 dollars.

“Crude oil prices retreated following losses in the global equity markets that weighed on sentiment,” said Sucden analyst Myrto Sokou.

“Furthermore, the weaker-than-expected eurozone and German PMI data added further pressure and prompted some sell-offs in the financial markets.

“The oil market also reacted negatively and crude oil prices extended their losses amid continuing worries about the levels of oil demand in the near term.”

European stock markets fell Thursday, reversing opening gains, as investor sentiment was dented by news of weak eurozone manufacturing data and a surprise contraction in the Irish economy.

September’s eurozone purchasing managers’ index (PMI), a survey of 4,500 euro area companies compiled by research group Markit, came in far weaker than expected.

The combined manufacturing and services index for September crashed to 53.8 points from 56.2 in August.

Prices also weakened on Wednesday as traders digested a sizeable jump in US crude oil stockpiles, which climbed by one million barrels in the week ending September 17. Market expectations had been for a drop of 1.7 million barrels.

“The latest set of weekly data on US inventory levels was anything but positive,” said analyst Tamas Varga at PVM Oil Associates.

“There were increases in major product stocks despite analysts’ expectations of draws in crude oil and gasoline (petrol) inventories.”