8-KMaterial AgreementsExhibits & Filings

AMERICAN INTERNATIONAL GROUP, INC. 8-K Report, Material Agreement (Sep 18, 2008)

Filed September 18, 2008For Securities:AIG

Summary

This 8-K filing from September 18, 2008, reports on a material definitive agreement between American International Group, Inc. (AIG) and the Federal Reserve Bank of New York (NY Reserve Bank). AIG has secured a revolving credit facility of up to $85 billion, which is crucial for its short-term liquidity needs amidst significant market turmoil. The facility carries a high interest rate (three-month Libor plus 8.50%) and a 24-month term. Importantly, it is secured by all assets of AIG and its material subsidiaries, indicating the severity of AIG's financial position. In conjunction with this agreement, AIG issued a warrant to the Federal Reserve allowing them to acquire up to 79.9% of AIG's common stock, contingent on shareholder approval, signifying substantial government intervention and potential for a change in control.

Key Highlights

  • 1AIG has entered into a $85 billion revolving credit facility with the Federal Reserve Bank of New York.
  • 2The credit facility has a 24-month term.
  • 3Borrowings under the facility are subject to an interest rate of three-month Libor plus 8.50%.
  • 4The credit facility is secured by a pledge of all assets of AIG and its Material Subsidiaries.
  • 5AIG issued a warrant to the Federal Reserve to obtain up to 79.9% of its outstanding common stock, subject to shareholder approval.
  • 6The primary purpose of this facility is to address AIG's immediate liquidity needs.

Frequently Asked Questions

AIG entered into this agreement to secure immediate liquidity through a substantial revolving credit facility from the Federal Reserve Bank of New York, which is essential for its continued operations during a period of significant financial market stress.

The credit facility has a term of 24 months, bears interest at a rate of three-month Libor plus 8.50% per annum, and is secured by all assets of AIG and its material subsidiaries. A key covenant requires AIG to pay down the facility using proceeds from asset sales.

AIG issued a warrant to the Federal Reserve that, if exercised and subject to shareholder approval, would allow the Federal Reserve to acquire up to 79.9% of AIG's outstanding common stock. This indicates a significant level of government involvement and potential for a change in ownership.

The issuance of a warrant granting the Federal Reserve potential control over a significant majority of AIG's stock poses a substantial dilution risk to existing shareholders and represents a significant potential shift in the company's ownership structure, dependent on shareholder approval and warrant exercise.