8-KSecurities & ListingShareholder MattersCorporate Changes+1

AMERICAN INTERNATIONAL GROUP, INC. 8-K Report, Unregistered Securities Sale (Mar 5, 2009)

Filed March 5, 2009For Securities:AIG

Summary

This 8-K filing from American International Group (AIG) on March 5, 2009, details a significant transaction involving the issuance of Series C Perpetual, Convertible, Participating Preferred Stock to the AIG Credit Facility Trust. This trust was established for the benefit of the U.S. Treasury. The issuance of 100,000 shares for $500,000 in cash, alongside a lending commitment from the Federal Reserve Bank of New York (FRBNY), marks a critical development in AIG's efforts to stabilize its financial position during the 2008-2009 financial crisis. The transaction resulted in a change of control for AIG, with the U.S. Treasury, through the Trust, gaining substantial voting power and preferential rights. Specifically, the Series C Preferred Stock holders possess approximately 77.9% of AIG's aggregate voting power and are entitled to the same percentage of dividends on common stock, as if converted. This preferred stock issuance, exempt from registration under the Securities Act, also imposes restrictions on AIG's ability to issue further capital stock without the Trust's consent, underscoring the significant influence the U.S. Treasury now wields over the company's governance and future capital-raising activities.

Key Highlights

  • 1AIG issued 100,000 shares of Series C Perpetual, Convertible, Participating Preferred Stock to the AIG Credit Facility Trust, established for the benefit of the U.S. Treasury.
  • 2The transaction involved an aggregate purchase price of $500,000 for the preferred stock, in addition to a lending commitment from the Federal Reserve Bank of New York (FRBNY).
  • 3This issuance constitutes a change in control of AIG, granting the U.S. Treasury significant influence.
  • 4Holders of the Series C Preferred Stock now possess approximately 77.9% of AIG's total voting power and are entitled to 77.9% of dividends paid on common stock (as if converted).
  • 5The Series C Preferred Stock has preferential liquidation rights over common stock.
  • 6AIG's ability to issue additional capital stock is restricted and generally requires the consent of the Trust.
  • 7The issuance was conducted under an exemption from registration pursuant to Section 4(2) of the Securities Act of 1933.

Frequently Asked Questions

The Series C Perpetual, Convertible, Participating Preferred Stock is a new class of stock with a par value of $5.00 per share and an initial liquidation preference of $5.00 per share. It is perpetual, convertible into common stock, and participating in dividends on common stock, and holds significant voting rights and preferential liquidation rights.

The AIG Credit Facility Trust was established specifically for the sole benefit of the United States Treasury. The issuance of the Series C Preferred Stock to this Trust signifies a substantial financial backing from and influence by the U.S. government in AIG's operations and governance.

The transaction resulted in a change of control for AIG. The U.S. Treasury, through the Trust, now holds approximately 77.9% of AIG's voting power. Furthermore, AIG's Board of Directors is obligated to work with the Trust to ensure corporate governance arrangements satisfactory to the Trust, and AIG cannot issue further capital stock without the Trust's consent, subject to limited exceptions.

The issuance was conducted under Section 4(2) of the Securities Act of 1933, which provides an exemption from registration requirements for transactions not involving a public offering. This typically applies to private placements with sophisticated investors or in situations involving government entities.