The offering, in which the Treasury is expected to sell 15 percent of its AIG stake, is important for the U.S. government as it tries to sell off investments it made in multiple companies during the financial crisis.
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The share sale also will be a key moment for Chief Executive Officer Robert Benmosche. Benmosche, who became AIG's fifth CEO in less than five years in August 2009, put an immediate stop to a plan to break the company up in a fire sale of its parts.
He instead embarked on a plan to revive AIG around two core businesses, U.S. life insurer SunAmerica and global property insurer Chartis. Other businesses were sold, taken public or left to operate with a view toward an eventual sale.
AIG was literally minutes from bankruptcy when it was rescued in September 2008. The various iterations of the rescue package ended up being worth $182 billion, dwarfing the various other bailouts around the world.
The question now is how quickly the U.S. government exits its investment and whether it breaks even.
Benmosche has said he expects the government to be out of its AIG position by mid-2012. Fitch Ratings said recently its own models for the company assume the government is out by the end of 2012.
Either way, the terms of the recapitalization deal that closed earlier this year include penalties if the government's investment is not closed out by 2013. Those penalties include the potential for forced asset sales.
The Treasury plans to sell 200 million shares in the offering on Tuesday, with AIG selling an additional 100 million shares. The shares are expected to price after the close of U.S. markets.
Based on Monday's closing price of $29.98, the 300 million share offering would raise just under $9 billion. Shares sold in offerings such as AIG's typically price at a slight discount to their last close. For the Treasury to break even, it will need an average price of $28.72 on its 1.7 billion shares.
(Reporting by Ben Berkowitz and Clare Baldwin; Editing by Carol Bishopric)