AIG posts 1Q loss of $7.8B, plans to raise $12.5B

American International Group Inc. says it will raise $12.5 billion in the coming months as the insurer looks to shore up a capital base that has been rocked by deterioration in the credit markets.

AIG shares tumbled $3.27, or 7.4 percent, to $41.45 in after-hours trading Thursday after the company disclosed it needs fresh cash and reported a first-quarter loss of $7.81 billion.

The capital raising effort will be a two-step process, with the first portion estimated to raise $7.5 billion through an offering of common stock and equity units. The equity units will consist of subordinated debt securities and contracts that require the holders to purchase AIG stock at a future date. Read more