On Thursday in New York City, banks make their case to the U.S. Treasury to be part of group that will handle the government's sale of its American International Group stock.
According to people close to the situation, the government will choose a lead manager and a large syndicate to handle the sale.
Sources say the government is looking to pay fees of 75 basis points or less on the dollar amount of the stock sold. Those fees are similar to what Treasury paid banks that handled General Motor's initial public offering, fees that are below the 2% to 3% banks typically receive for similar sales.
Among the Wall Street chiefs attending the meeting is Morgan Stanley's chief executive officer James Gorman, whose firm was the lead bookrunner on the government's sale of its Citigroup stock. Sources confirm Bank of America CEO Brian Moynihan is also attending.
JP Morgan's CEO Jamie Dimon is a maybe; Citigroup CEO Vikram Pandit will not attend as he is on business in Europe.
The fact any of these of these CEOs are attending provides a clue as to how important Wall Street sees this sale. CEOs rarely attend bakeoffs, sending their lieutenants instead.
Beyond the team chosen to sell the stock, other questions to be answered about the sale in the coming weeks and months is how will it be sold—in tranches or in smaller stakes at regular intervals. Answers to these questions should become clearer during the roadshow, when the insurance giant's management makes its case to institutional buyers on why they should buy its stock.
Between now and January 20, AIG's stock could come under pressure. On that date, it starts trading ex-warrants, essentially completing another part of its recapitalization plan. When the warrants held by the government convert to common stock on the 20, Treasury's stake in AIG will rise to 92 percent from 84 percent. People close to the situation estimate AIG's stock could take up to a 25 percent hit during this conversion.
It is that 92 percent stake banks will be charged to sell, a massive and marquis offering for Wall Street firms.
The government and AIG are looking to make good on their promise to extricate themselves from an investment born of the financial crisis. The government saved AIG from collapse with a $180 billion dollar bailout plan made up of loans, guarantees and an equity stake.
Both now say Treasury will profit from this bailout. Estimates from sources put the breakeven number for Treasury at $29 to $34 a share for AIG's stock.