Pony up the dough: Bailed out companies race to pay back money

Uncle Sam might be getting his bailout money back faster than he thought.

As the economic continues to recover and Congress looks at greater regulation of bailed out companies, many of these firms have announced plans to repay government money at an even faster rate.
Troubled financial services giant AIG announced March 1 that it was selling its Asian insurance division to U.K. company Prudential for more than $35 billion , including $25 billion in cash it will use to help pay off more than $182.5 billion in loans, investment and guarantees held by the U.S. government.
Many of these companies received funds from the Troubled Asset Relief Program, a $700 billion funding program set up in the fall of 2008.
Bob Benmosche, AIG President and Chief Executive Office, said in a press release that the company accepted the offer as the most attractive and expedient way to pay back U.S. taxpayers, which he said is now on a “faster track.”
“This transaction, the most significant milestone to date in our ongoing effort to repay taxpayers, also gives us greater flexibility to move forward with AIG’s restructuring and focus on enhancing the value of our key insurance businesses, which will benefit all stakeholders,” Benmosche wrote.
The CEO of GMAC Financial Services, an independent company that services GM dealership and car loans, said in a hearing Feb. 25 that the company is planning on paying back the entire $17.2 billion invested in the company as part of the automotive bailout.
Michael Carpenter, the CEO of GMAC, outlined the company’s repayment strategy in testimony to the Congressional Oversight Panel, a special task force formed to review the financial markets and regulatory reform.
Carpenter said that the company plans on stabilizing its debt before moving on to a series of Initial Public Offerings to help raise more capital. He estimated the first IPO to be one to two years in the future and that the government, which owns more than 56 percent of the company, would be able to start seeing returns on its investment.
“Our financial advisors are telling us as long as we execute the plan we are embarked upon that certainly we can undertake the IPO in the next year or two and then repay the rest of the money shortly thereafter,” Carpenter said.
Carpenter pointed to the fact that GMAC has made about $1 billion in dividend payments so far, and recently raised $2 billion in unsecured bonds, as signs of an improving fiscal situation.
Other financial companies have already finished paying back government money, including Citigroup, which announced in December, 2009 that it would repay $25 billion in funds and convert its outstanding debt into shares in the company.
Goldman Sachs, Morgan Stanley and JP Morgan Chase all paid back government bailout funds in June of 2009.
According to a database by ProPublica, 62 companies have paid back TARP funds or other government assistance.
PNC Financial Services, which used more than $7.5 billion in government assistance to buy distressed competitor National City Bank, paid back its TARP funding Feb. 10, 2009.
Wells Fargo, which received $25 billion in TARP funding, paid back its obligation to the government Dec. 23, 2009.